The Carbon Neutral Fallacy, Part 2: New carbon offset providers are setting up shop by the dozens ready to relieve consumers of their guilt, and cash, but with little regulation the industry is coming under increased scrutiny.

It has been called “the Wild West” by one insider and full of “snake oil salesmen” by an airline rep, because for an industry selling a very intangible product it’s often difficult to know exactly what we’re buying.

Setting aside the controversy over whether the industry’s projects even generate much, or any, real value (Part 1 of this series), business is booming for the offsetting industry. In the past two years the market has grown from about a dozen companies selling offsets worth $6 million to 60 companies selling offsets worth $100, according to Abyd Karmali of ICF International.

We talk about a 300 million pound (600 million dollar) predicted market.

This is only the beginning, the market is expected to reach £300 million by 2009, and the managing director of one offset provider, Ingo Puhl of 500ppm, claims it could grow exponentially, “In terms of overall market potential, we are tapping less than 1%”. But according to a new report by much of this money will most likely never be used for actual carbon emissions reductions.

As little as 25% is going to offsetting projects

Last December, researchers at the Tufts Climate Initiative published a report on the industry finding that the quality and standards of offset companies vary greatly, causing one of their reviewers to opine, “It’s the Wild West!”.

Offset companies are both for and non-profit and while the report claims this distinction doesn’t indicate project and offset quality, they do point out that the for profit companies “were less forthcoming about their financial situations and tended to have higher overhead costs.”

Perhaps there is reason for the lack of transparency. With the for profit companies, less than half- 43.4%- of the money raised from offsetting clients actually goes toward projects while the non-profit average is 81.6%. But the reviewers point out that this could be the result of non-profits defining “project implementation” more broadly.

Cleanairpass, a Canadian for profit company, rated poorest with just 25% of their sales going toward actual offset projects. On the other end of the spectrum, the top four (all non-profits) were:

• Carbonfund.org: 93%.
• CarbonCounter.org: 90%.
• Atmosfair: 80%.
• Myclimate: 80%.

How much for a ton of neutrality?

Offsetters also charge radically different amounts to help you offset your emissions. According to a review of the industry by Clean Air – Cool Planet, the range in offset price is anywhere from $5 to $25/ton, with the average at $10/ton. While the reviewers state that there is no causal link between price and quality they do warn, “if something sounds too good to be true, it probably is.”

The carbon calculators used by the offsetters also vary widely. To better determine the differences between how companies price and calculate their emissions, The Tufts reviewers made a sample calculation using a short-haul flight and a long-haul. With the flight from Boston-Washington DC, they found a range of carbon emitted from a low of .19 tons/passenger (Climate Care) to a high of .48 tons (atmosfair). For the flight from Boston to Frankfurt, Germany, the range was even larger: from 1.43 (The CarbonNeutral Company) to 4.14 tons (atmosfair).

Why so different? The reviewers point to the different factors that offsetters use to make their calculations, such as, flight distance (shorter flights burn more fuel), occupancy efficiency, business vs. economy, type of plane and radiative forcing (measuring the amount a given atmospheric gas alters radiation entering the atmosphere- this is related to the clouds that can form from aircraft emissions which double a plane’s radiation effect, also called contrails or condensation trails).

They found that “atmosfair has the most detailed and best documented calculator” and gave atmosfair and climate friendly “excellent” status while Carbonfund, The CarbonNeutral Company, Climate Care, Offsetters and Terrapass calculate emissions “too low”.

The Gold Standard

While there is no mandatory industry regulation, offsetting firms have the choice to submit to voluntary standards. The most rigorous is the Gold Standard which was initiated by the NGO’s WWF, SSN and Helio International and endorsed by 42 NGOs worldwide.

Gold Standard certified projects focus on those that support “a fundamental change in behaviour (namely, shifting from a fossil fuel-dependent lifestyle and the subsequent fossil fuel based economy).” Therefore, they reject forestry projects, large scale hydro power (over 15MW) and energy from waste (incineration) projects. Instead, they solely support those that fall into one of the two areas:

• Renewable Energy: Solar, Biomass, biogas and liquid biofuels (if they produce electricity), Wind, Geothermal, Small Hydro (< 15 MW).
• Energy Efficiency: Industrial, Domestic, Transportation, Public sector, Agricultural sector, Commercial sector.

The Gold Standard focuses projects that supports “long term solutions” and “local sustainable development”, eschewing forestry projects, even though the UN supports them to achieve these goals. “Our goal is to promote energy sources that cut back on emissions from the very beginning. Afforestation and reforestation fall outside of this goal of behavior change (i.e. cutting back on emissions from the beginning). There will ultimately be a need to capture carbon in forests at a later date and Gold Standard does not include capturing in its realm.”

Offset retailers with projects which meet the Gold Standard criteria include myclimate, atmosfair and Climate Friendly.

How they stack up

While offsetters do make changes to improve their standards, when the two reviewers that we’ve profiled in this article published their findings- in December of 2006- here is how the providers were rated.

The Tuft Climate Initiative Ratings (listed alphabetically within categories):

• Recommended: Atmosfair, Climate Friendly, Myclimate (Swiss site, US site), Native Energy.
• Recommended with reservations: CarbonCounter/Climate Trust, Carbonfund, The CarbonNeutral Company, Climate Care, Offsetters, TerraPass.
• Not recommended: Better World Club, Cleanairpass, Solar Electric Light Fund.

The Clean Air Cool Planet’s Top Performing Retail Offset Providers (listed alphabetically): AgCert/DrivingGreen, Atmosfair, CarbonNeutral Company, Climate Care, Climate Trust, co2balance, NativeEnergy, Sustainable Travel/MyClimate.

• Click here to read the first part of this article.