Enron environmentalism or bridge to the low carbon economy?
Carbon offset providers calculate the amount of CO2 emitted by common consumer activities like driving a car or going on holiday. They then calculate the cost of ‘offsetting’ the equivalent amount through funding a project designed to reduce carbon emissions such as a small-scale renewable energy or forestry scheme. If you choose to pay for this offset you can claim to have taken responsibility for your emissions and done at least a small bit to help combat climate change. What could be wrong with this?
The market in voluntary carbon offsets is in the midst of explosive growth. A web search showed up more than 40 providers. Consumers can now buy offsets by text message, bundled with insurance, with mortgages or with mobile phone contracts, over the counter at travel agents or in a gift box from the Science Museum. Michael Buick of Climate Care, a UK provider established in 1998, said the company’s sales were expected to rise from around 150,000 tonnes in 2006 to one million in 2007.(1)
Carbon offset companies, environmentalists and the Government all agree that offsetting is not the solution to climate change – carbon reduction measures must come first. Those in favour of the industry see offsetting as a useful tool for increasing consumers’ ‘carbon literacy’ and a source of funding for sustainable development. Michael Buick sees it as “a way to fund the transition to a low carbon economy.”(1)
A wave of criticism
The idea of carbon offsetting has, however, faced steadily growing criticism. Friends of the Earth (FoE) describes carbon offsetting as ‘a smokescreen to avoid real measures to tackle climate change’.(2) Kevin Smith, author of “The Carbon Neutral Myth” makes the analogy between carbon offsets and the medieval practice of selling ‘indulgences’ for the remission of sins.
He goes on to describe carbon offsets as commodifying, privatising and de-politicising the difficult social and political task of mitigating climate change and achieving climate justice.
In a joint statement, Friends of the Earth, Greenpeace and WWF-UK have expressed “strong concerns over [their] environmental credibility…and the contribution of the projects to sustainable development.” Campaign group Carbon Trade Watch have dubbed offsetting “Enron environmentalism” – nothing more than a clever accounting trick.
Yet FoE, Greenpeace and WWF-UK say they do offset, but choose projects certified by the new ‘CDM Gold Standard’ (see 'Standards for consumers' below). So in order to find an Ethical Consumer best buy for carbon offsets we have used a different type of rating table to those used in our normal reports. The industry is so new, and with such distinctive issues, that our normal rating table was less useful. We have, however, checked parent companies in the normal way and an overall ethiscore appears in the new table.
Download a pdf of the Carbon Offset schemes' comparison table and profiles of the carbon offsetting companies here.
In this extended report we describe some of the quite complex products and issues, provide resources and ideas, and even look at some of the more bizarre elements of this most unusual market.
Seeing the wood for the trees
The first offset projects involved tree planting, on the principle that trees absorb carbon as they grow. However, the science of how effectively planting trees reduces global warming is far from certain. A recent study for example even suggested that, although tropical forests do have a cooling effect, at higher latitudes, trees have a warming effect.(3)
In 2006 the Advertising Standards Authority ordered the Scottish & Southern Energy Group to stop making claims in its leaflets about ‘neutralising’ its customers’ emissions because the company could not provide proof that the planting of trees would match the level of emissions. An even more fundamental problem is the false equation between fossil carbon and biological carbon.
When fossil fuels are burned they release carbon into the biosphere that has been outside of the carbon cycle between air, sea and biomass for millions of years. If the total amount of carbon in the biological carbon cycle is increased, the cycle’s provision of climate stability is undermined. As Kevin Anderson of the Tyndall Centre for Climate Change says, “What happens if the trees die in a forest fire and release their CO2 back into the atmosphere?”
Climate change experts give us a brief window of a decade or two in which to reduce emissions. Yet providers may account for 100 years of forest carbon absorption in the year saplings are planted. For example, Climate Care accounts for 29,500 tonnes of CO2 offset in 2005, against 74 hectares of forest planted that year.
In the wake of controversy the industry has tried to get away from the equation of offsetting with tree planting. In 2005 Future Forests re-branded itself The CarbonNeutral Company and Climate Care states it is not looking to invest in forestry projects in the future.
The whole notion of offsetting also depends on the idea of “additionality” – that the savings in emissions are additional to what would have otherwise happened without the offset funding. Jutta Kill, of the Forests and the European Union Resource Network (FERN) says the very idea is “conceptually incoherent”. The effects of offset projects, she says, are impossible to verify.(6)
Proving “financial additionality” is complex as projects are rarely fully funded by offsetting. Usually the offset provider buys the ‘carbon rights’ to a project that it partially funds.
The CarbonNeutral Company (TCNC) has run into controversy over additionality and transparency. Customers were invited to invest in Orbost forest in the West Highlands. Donors may have thought they were paying to plant trees. The confidential contract with Highlands and Islands Enterprise, released under freedom of information legislation this year, shows that customers were actually buying the “carbon rights” to trees.
Kevin Sutton, the manager of Orbost forest, said that while he welcomed the “extra money,” which paid for refurbishing a footpath, the woodland would have been planted anyway with government grants.(7) The Forestry Commission, which has granted £103,000 for planting in Orbost, does not sell the ‘carbon rights.’
The issue of transparency was raised five years earlier with TCNC (then ‘Future Forests’) in a ruling from the Advertising Standards Authority (ASA)(8) concerning a misleading advert in the Sunday Times. Readers were led to expect that their payment would to be used to plant trees, argued the ASA, when in fact the money would buy ‘carbon sequestration rights’ to trees.
Providing 100% of project funding is one answer to additionality, as co2balance Ltd guarantees. NativeEnergy, which funds wind generators in Native American communities, has another strategy. The company purchases the (US) ‘renewable energy credits’ that will be generated over the life time of projects up front, enabling projects that would not otherwise be viable.
Supply chain issues and CO2lonialism
Critics regard offsetting in the global South as a distraction from the real issue of fossil fuel use in the wealthy North. For Larry Lohmann of NGO the Corner House, offsetting is the “fossil fuel economy’s new frontier” in which neocolonial power relations are reproduced: “Added to classic local struggles over extraction, pollution, and labour abuse are now, increasingly, local conflicts over carbon offsets”.
Both the CarbonNeutral Company and Climate Care have run into controversy.
In Uganda’s Kibale National Park, Climate Care funds a project established by FACE, a Dutch offset organization. The project is run by the Ugandan Wildlife Authority (UWA) and audited by SGS-Qualifor. The project provides offsets for the Co-operative Bank, amongst other customers.
A recent World Rainforest Movement report(9) documents land disputes and human rights abuses at Mount Elgon, a different national park in Uganda, also run by FACE and the UWA and audited by SGS. In March 2002, a few days before SGS issued a certificate for the Forestry Stewardship Council (FSC) for Mount Elgon, the UWA evicted more than 300 families from the area and destroyed their homes and crops.
That the project was taking place in an area of on-going land conflict and alleged human rights abuses did not make it into SGS’s report. SGS’s credibility has also been called into question by the decision of the FSC’s Accreditation Service to suspend another of its certificates, issued to the Barama company in Guyana.(10)
At the time of writing the Kibale certification was due for renewal. Ethical Consumer raised the issue of doubts over SGS with Tom Morton, Climate Care’s Director of Projects. He was unaware of concerns with the company and promised to raise the issue with FACE.
In January 2007 the BBC’s “Inside Out” claimed that the communities in the Kibale area have been denied access to forest resources and that workers on the project were denied a living wage.(11) In a statement rebutting the allegations, Climate Care noted “there is no traditional community right to exploit the land.”(12) According to Jutta Kill, a researcher for FERN who has conducted fieldwork in the area, in 1993 (long before Climate Care’s involvement) 30,000 people were violently evicted from the land.(25)
Jutta Kill stated that the wages on the offset project were considered extremely low and were half that of tea plantation workers in the local area.(6) She accuses Climate Care of buying into an outmoded model of “park versus people management”. Climate Care’s Tom Morton, who had just returned from reviewing the Kibale project, rejected these allegations and told Ethical Consumer the company were happy with the workers’ conditions.(13)
Climate Care also deny that there is a problem with communities accessing resources from the park, with “access…managed by local village governance committees”.(12) Jutta Kill responded, “Locals laughed out loud when asked about these local village governance committees. Even [the] UWA acknowledge…that these committees are largely dysfunctional and in existence only on paper.”(14) Tom Morton told Ethical Consumer the villages he had just visited had no such problems, with functioning local committees.
The controversy raises the issue of whether small, private offset companies have the capacity or the skills to address the kind of supply chain issues which ethical consumers increasingly expect companies to attend to.
Although the CDM Gold Standard has extensive provisions for stakeholder engagement it is unclear whether they are adequate to resolve “supply chain” conflicts when stakeholders come to the table from extremely unequal positions. If the industry is to address the ethical concerns of those at the ‘coal face’ of carbon offsetting an explicit and robust code of conduct for workers’ rights is needed.
Rating offset providers
In December 2006 two consumer guides to offset providers were published in the USA employing complementary evaluative criteria (see LINKS). Ethical Consumer used these as the basis on which to select providers to evaluate by its own criteria.
Clean Air Cool Planet (CACP), a leading US non-profit organisation promoting solutions to climate change, rated 30 offset providers against seven criteria on a scale of 1-10:
• Providers‘ prioritisation of offset quality
• Buyer’s ability to transparently evaluate offset quality
• Transparency in provider operations and offset selection
• Providers’ understanding of the technical aspects of offset quality
• Priority assigned by provider to educating consumers about climate change
• Ancillary environmental and sustainable development benefits of offset portfolios
• Use of third party protocols and certification
Eight providers earned a cumulative score of more than 5: Atmosfair, DrivingGreen, CarbonNeutral Company, Climate Care, Climate Trust, co2balance, NativeEnergy and MyClimate. The report did not attempt to rank this top tier.
The Tufts Climate Initiative chose 13 providers on the basis of Google scorings and evaluated them on the following criteria:
• Accuracy of air travel emissions calculator
• Project portfolio: should be mainly or entirely energy efficiency or renewable - little or no forestry projects
• Project/Offset Quality: based on additionality, permanence, contribution to development of low carbon economy; implementation standards and independent verification; additional development benefits.
• Transparency of procedures, verification schemes, financial arrangements and partnerships.
• Percentage of sales going directly to project implementation.
Four were recommended - Atmosfair, MyClimate, NativeEnergy, and Climate Friendly – all but the last of which were also recommended by CACP.
In addition Ethical Consumer has looked at four newcomers, all based in the UK, recommended by DEFRA’s draft voluntary Code of Best Practice for carbon offsetting(15) – Carbon Offsets, Equiclimate, Global Cool and PURE.
The ‘CDM Gold Standard’ (see below) has recently begun certifying offset projects. Other codes such as the UK government’s and the ‘Voluntary Carbon Standard’ are still at the consultation stage.
In a sense, therefore, the older offset companies start with a disadvantage as their projects are up and running and the newer companies have no track record on which to judge them. All but one provider (AgCert\DrivingGreen) were excluded from rating on our environmental reporting criteria due to being smaller companies (less than £5 million turnover). However standards of environmental reporting were disappointing across the industry.
Click here to see a pdf of the Carbon Offset schemes' comparison table and profiles of the carbon offsetting companies.
Standards for consumers
The consumer market in carbon offsets has long been recognised to have a lack of transparency and for extremely variable standards in the implementation, monitoring and verification of projects.
This has led to demands for government intervention and in January 2007 the Environment Secretary David Miliband announced a consultation process to develop a voluntary ‘Code of Best Practice,’ to be published later in the year. The UK government clearly wants to encourage offsetting and is keen to demonstrate its green credentials through its own offsetting scheme for official air travel.
Controversially the government’s draft code does not offer a standard for the small-scale projects that make up the bulk of the current consumer market. Instead it endorses projects verified under the mechanisms of the Kyoto Protocol, which govern offsets in the compulsory corporate markets, such as the European Emissions Trading Scheme. Businesses use these ‘Kyoto credits’ to offset against their compulsory emissions allowances. Under the Kyoto Protocol, criteria for project additionality are:
• that it is not required by current regulation
• it uses technologies that are not common practice
• or it faces economic, technological or investment barriers and would not have started up without the offset funding
In reality this involves over 60 approved methodologies and complying with these complex criteria pushes up the cost of projects.
Critics point out that these requirements tend to exclude the small scale, sustainable development projects that customers are attracted to and that provide value added benefits. Michael Buick of Climate Care points to the company’s scheme to provide efficient stoves in the Third World, preventing ill health from fumes, improving safety and reducing deforestation. There is currently no methodology in place in the Kyoto regulations for such a project, so its offsets could not be officially certified as ‘Kyoto credits’.
Furthermore, the Kyoto mechanisms have been accused of failing to deliver sustainable development. For example, renewable energy is involved in only 2% of Kyoto projects. And three quarters of projects involve major petrochemical and manufacturing plants. As for ‘additionality’ arguably many of these projects should have occurred anyway under the Montreal ozone-depletion protocol.(16)
In a typical project, Centrica (British Gas’ parent company) is investing in technology for capturing emissions of the potent greenhouse gas HFC-23 from a Chinese chemical company. Mike Rigby of co2balance says his company has Kyoto credits for sale but no-one is interested in buying them. “Who is interested in voluntarily paying money to an industrial plant in China?” he said. As Michael Buick of Climate Care points out, it is the value-added benefits of projects, the ‘story’, that attracts consumers.
However both The CarbonNeutral Company and Climate Care told Ethical Consumer that they will begin offering ‘Kyoto credits’ alongside their usual offsets. We would expect others to follow suit.
The ‘CDM Gold Standard’ has recently emerged as a measure of best practice. Backed by Greenpeace, FoE, WWF, and many other NGOs, the Gold Standard credits individual projects, not offset providers. Only renewable energy and energy efficiency projects with sustainable development benefits are eligible.
The Gold Standard requires higher standards than the Kyoto mechanisms, such as stakeholder consultations involving a Gold Standard NGO. It also accredits projects outside of the Kyoto regulations and therefore provides a standard for the small scale projects popular with consumers. Gold Standard projects have not escaped criticism (see “The Strange World… below”). But despite these problems the Gold Standard does appear to currently provide the best available benchmark.
Another approach entirely has been adopted by a new generation of consumer carbon offset companies. In the European Emission Trading Scheme (ETS), ‘EU allowances,’ representing a tonne of CO2 emissions, can be traded between companies. Offset providers buy these allowances on the behalf of consumers and then ‘retire’ them - permanently removing them from the market.
As a result, the overall limit on CO2 emissions is reduced. Elegant though this idea is, it is not without problems. Over-allocation of allowances and a glut of cheap Kyoto credits for businesses has pushed down the cost of polluting. As a result, phase one (2005-2007) of the ETS has failed to drive emission reductions, says EU Energy Commissioner Adris Piebalgs. For phase two (2008-2012) to succeed, the European Commission must stop cheap ‘Kyoto credits’ flooding the market.(17)
Consumers should be wary of paying high prices for EU allowances. At the time of writing, EU allowances were trading for 1.18 euros, while one company (not reviewed) was offering to sell EU allowances to consumers for £30. Equiclimate, on the other hand, has fair and transparent pricing, with prices calculated daily (£3.91 at the time of writing).
Phil Levermore, Equiclimate’s Director, explained that this price reflected transaction costs in the market, and spread buying from the current and futures markets (phase two). According to Paul Monaghan, Co-operative Bank’s Head of Sustainable Development, “no one should be buying any phase one EU allowances, it’s a waste - that’s why we avoid it, even though it would save a packet if we went down this route.”
Alternatives to offset providers
Involving consumers in the Kyoto mechanisms and the ETS opens up the possibility of concerted consumer action to drive up the price of polluting. However, critics of carbon trading question whether commodifying pollution can drive emission cuts at all. And beyond 2012 it is uncertain the market will even exist.
Kevin Smith of Carbon Trade Watch would like us to move beyond choosing between ‘good’ and ’bad’ offset companies. Instead he suggests we should forget the rhetoric of offsetting and carbon neutrality and simply support worthwhile projects.
• Kevin Smith cites the example of Palang Thai, a Thai non-profit organisation that seeks to transform the energy sector on the basis of sustainability and social and environmental justice. Palang Thai has succeeded in stopping the development of two coal-fired power stations in the area. The organisation also collaborates in the development of community-based renewable energy projects.
• The Ken Saro Wiwa Foundation campaigns for corporate responsibility in resource industries and supports projects aimed at strengthening and reconciling communities now in conflict in the Niger Delta. After decades of social and political struggle, victory finally came in 2006 when the Nigerian courts ordered Shell to stop flaring gas, thus securing an enormous carbon offset for the world. The Foundation is therefore a particularly apposite recipient of ‘offset’ donations.
• Another option could be to support the Post Carbon Institute, a “think, action and education tank” which offers research, project tools, education and information on how to move beyond the fossil fuel economy. The Post Carbon Institute focuses on strategies of ‘re-localisation’ to improve environmental conditions and social equity.
• Rather than offsetting on your own you could get involved with a Carbon Rationing Action Group. These are support groups exploring ways to reduce emissions and can serve as collective vehicles to support the kind of sustainable projects commonly associated with offsetting without the ‘greenwash’ baggage.
Find a local Carbon Rationing Action Group www.carbonrationing.org.uk.
Join a 15,000 strong community reducing carbon www.cred-uk.org
• One second generation carbon reduction organisation moving ‘beyond carbon neutral’ is “The Converging World” (TCW) a UK charity established in 2006 . TCW is an innovative scheme that links community and business carbon reduction projects in the UK with renewable energy and sustainable development in India.
In the UK TCW will facilitate community carbon reduction and renewable energy projects based on the successful GoZero organisation. Business will engage in its own reduction schemes and provide funds by buying and retiring ‘Kyoto credits’ generated by TCW’s Indian partner organisation Social Change And Development (SCAD), which is developing wind farms in Tamil Nadu. Revenue raised in India from the wind farms will then fund SCAD’s projects to empower marginalised communities.
• Trees for Life is a Scottish charity dedicated to ‘restoring the Caledonian forest’. It admits on its website that carbon offsetting through tree planting is a bit of a nonsense but still has a form enabling you to ‘make a donation to help offset your carbon emissions’.
Of course a measured donation to one of those progressive behemoths like FoE or Greenpeace may just be as good as any of these.
The Strange World of Carbon Offsets
“Silverjet Awarded Carbon Neutral Airline of the Year Award 2007.” So reads a press release on the CarbonNeutral Company’s website. “The world’s first carbon neutral airline” includes the price of a ‘carbon offset’ in its £999 fair to New York, as well as offering a chauffeur driven service to the airport. According to Silverjet, “If the industry was to simply charge its customers 90 pence for each hour they fly on average, then they could neutralise the carbon pollution created by the aviation industry.”
CarbonNeutral® is the leading kite mark for company “carbon branding”. To earn it, the CarbonNeutral Company requires businesses to measure and identify reductions in CO2 emissions and ‘offset’ the remainder. Sue Welland, founder of the CarbonNeutral Company, is adamant that buying an offset “is not a donation, a customer is buying a reduction of one tonne (etc) of CO2.”(19)
So can an airline really be carbon neutral? Ethical Consumer asked Sue Welland whether awarding an airline CarbonNeutral® status wasn’t just ‘greenwash’? “Silverjet is not CarbonNeutral,” she replied, “it is making all flights CarbonNeutral”.(20) Despite, then, the much repeated claims of the offset industry that offsets are a last resort, Silverjet has not been through the CarbonNeutral Company’s emissions reduction programme.
A recent Oxford University study highlighted how ‘frequent fliers’ such as Silverjet’s target market were disproportionately responsible for greenhouse gas emissions. The 20% of individuals with the worst carbon emissions were responsible for 80 times the emissions of the best 20%.(21)
|The ‘carbon neutral’ G8 summit
In 2005 Margaret Beckett, then the Environment Secretary, announced that the 4,000 tonnes of CO2 generated by the G8 summit of that year would be offset - “over two years.” The offset project involved installing solar water heaters, low-energy light-bulbs and ceiling insulation in more than 2,000 homes in Kuyasa, a township in Cape Town.
As the residents were to be provided with electricity for the first time, the savings in emissions were calculated by predicting that all locals would have otherwise switched to conventional electrical power by 2028. Despite the initial claim the reductions were in a two-year time frame it was realised that because people were being provided with electricity for the first time initially emissions would rise. The savings would actually occur over the 21 years of the project.(22)
Britain pledged £100,000. By January 2007 not a penny had been spent as the organisers had to find £2.5m to implement the plan. Cape Town council have calculated that the procedures required by the Kyoto mechanism, and hiring auditors, will cost £54,000, leaving the council £17,000 in debt.(23)
Mike Childs of Friends of the Earth commented, “the government would have done better to concentrate on the supply of low energy light bulbs in the UK before moving on to Africa.” Kuyasa was the first CDM Gold Standard project.
Offsets are generally marketed as if the emissions of a given activity, such as flying, are neutralised instantaneously. Mike Mason, founder of Climate Care, has said “I would rather that 100% of people offset their emissions from flights than 50% of those people not fly at all.”(4)
Kevin Smith of Carbon Trade Watch has estimated how long it would take the company to offset the carbon from a flight from the UK to New York. Climate Care’s portfolio of projects include energy efficiency (50%), renewable energy (20%) and forestry (30%). These produce emissions reductions over time scales of approximately 6 years (life of a CFL bulb), 12 years (life of a wind turbine) and 100 years (life of a tree).
For a flight taken on New Year’s Eve 2005, by 2018 original emissions are 80% offset through six years of energy efficiency savings and 12 years of renewable energy generation. However because forestry offsets at the rate of 0.3% of the original emissions a year, it takes until 2106 before we can declare the flight ‘carbon neutral’.
You might say an offset of 80% within 12 years looks pretty good. But only if it is the only flight you ever take. What about more frequent flyers? Because the emissions build up faster than they can be offset, it is a very different picture. Taking just three trips a year and offsetting with Climate Care, by 2036, 51 tonnes of CO2 remain in the atmosphere.(5)
4 New Internationalist, July 2006 , 391 "If you go down to the woods today"
5 based on its 2005 portfolio, "Climate Care Annual Report 2005"
6 telephone conversation 26/2/07
7 Sunday Herald, 25 February 2007
8 ASA Future Forest Ltd 20/11/02
9 "A funny place to store carbon": UWA-FACE Foundation's tree planting project in Mount Elgon National Park, Uganda" C. Lang and T. Byakola (2006)
10 www.fsc-watch.org/archives/?other~=SGS+Qualifor viewed 12/3/07
11 Broadcast on BBC1 in the London area on Friday 12th January 2007
12 "Climate Care response to criticisms of the rainforest restoration project, Kibale National Park, Uganda" 30/1/07
13 Telephone conversation 5/3/07 14 personal communication 26/2/07
15 DEFRA Jan 2007 "Consultation on establishing a voluntary Code of Best Practice for the provision of carbon offsetting to UK customers."
16 New Internationalist 391, July 2006 17 "EUETS will not drive abatement in phase 2" ENDS 385 Feb 2007
18 www.pointcarbon.com viewed 8/3/07
19 www.carbonneutral.com/ viewed 8/3/07
20 email 5/3/07 21 "Aviation dominates transport impacts" ENDS Report, Feb 2007, 385 22 "G8 summit ?carbon offset' was hot air" The Sunday Times 21/1/07
24 K. Smith "The Carbon Neutral Myth," 2007, p.30
25 viewed 29/2/07 26 email 1/3/07
25 see also "Salvaging Nature: Indigenous Peoples, Protected Areas and Biodiversity Conservation" M. Colchester (2003) http://www.wrm.org.uy/subjects/PA/nature.html