Personal Carbon Offsetting

Lynne Kiesling

Yesterday’s New York Times had an article about voluntary purchases of carbon offsets and their efficacy. Importantly, this article points out that private options exist for those who want to negate the carbon effects of their behavior.

The couple highlighted in the story used Climate Care. Other organizations that provide carbon offset purchase opportunities are listed in the right margin of this NRDC story on carbon offsetting. You can even give carbon offsets as gifts!

See also this Wikipedia entry on carbon offsets for more background. Both the NYT article and this Guardian article from last year talk about transparency problems and the difficulty of monitoring the offsetting activities in some areas and with some organizations.

The NYT article contains a logical slipperiness that it’s important to recognize:

Yet another perverse effect, say critics, is that some types of carbon-offset initiatives may actually slow the changes aimed at coping with global warming by prolonging consumers’ dependence on oil, coal and gas, and encouraging them to take more short-haul flights and drive bigger cars than they would otherwise have done.

Climate Care, for example, has linked up with Land Rover, a maker of sport utility vehicles, to help the company offset its own emissions. As part of a promotional program, Climate Care also helps purchasers of new Land Rovers offset their first 45,000 miles of driving.

In that way, the program may actually help sell “larger cars with higher emissions” and thus contribute more to global warming, according to Mary Taylor, a campaigner with the energy and climate team at Friends of the Earth.

Ummm … if we are talking about static efficiency, the only way Ms. Taylor’s statement can be true is if the offset is calculated and/or implemented inaccurately. Carbon offset transactions provide a voluntary, contractual way for the two parties involved (and the broker organization, e.g. Climate Care) to pursue the things they want to pursue. If I do indeed buy a larger car, but I buy a corresponding offset, then there’s no perverse effect. And the magnitude of the dynamic perverse effect requires a complicated counterfactual argument: at the margin, what size of car would I have bought if I had not bought a carbon offset, and to what extent does that purchase delay the implementation of non-fossil-fuel technologies? That analysis requires careful market analysis of the substitute brands that compete with Land Rover. It’s very likely that consumers would have bought a large vehicle anyway, because of their planned uses of the vehicle, and at the margin the offset induces them to choose Land Rover over a different, similarly-sized vehicle.

Here’s another piece of poor logic in the story, a version of the broken window fallacy:

Climate Care, the company that Mr. Grover used to offset his and his girlfriend’s carbon footprint, also undertook a project to finance the distribution of tens of thousands of low-energy fluorescent lights in South African townships.

Shortly after the program got under way, however, a state energy utility distributed millions of similar bulbs free. That meant that the “so-called reductions that Climate Care is selling to its customers arguably would have happened anyway,” said Larry Lohmann of the Corner House, a campaign group for environmental and social justice based in Britain, citing evidence from investigators in South Africa.

Grrrr. If private parties are willing and able to pay for the private, voluntary distribution of CFBs, then that is an expenditure that the South African government would not have to undertake, thus freeing those tax revenues to be spent in some other way that would benefit South Africans. So why is the private action the one that Mr. Lohmann considers superfluous? In reality, it’s probably the case that the light bulb purchase had been budgeted, the producer had a friend in the government, and there was some lobbying and rent seeking involved. But the underlying point holds: if private actors are willing to pay for so-called public goods and the government does it anyway, that’s called crowding out, and it’s an inefficient, distortionary act.

Why do I support the development of carbon offset transactions and their brokers? Because it’s a Coase-style private, voluntary, transaction-based approach that enables private parties to achieve mutually beneficial outcomes.


5 thoughts on “Personal Carbon Offsetting

  1. Lynne,

    While I agree that privately purchased Carbon Offsets appear to be a great idea – in theory, I think we need to remember the complex nature of the issue.

    I sense many are choosing to buy credits today because – for lack of a better term – it’s trendy to do so. Will that willingness last as long as the car they have purchased? And if people’s interest fades, have we incented them to purchase bigger cars; have we incented them to construct their lives around increased driving?

    If private carbon offsets create demand for larger cars and less carbon efficient behavior, who is responsible for offsetting the marginal carbon impact from market driven production? Presumably demand for bigger cars drives steel, rubber and plastic production. Manufacturing, distribution and driving larger cars also increases carbon emmissions in a long chain of supply and ‘accomodation’.

    If a select group choose to purchase private offsets, how will that impact the political will to implement broader carbon reduction programs? Will there be as much support for congestion tolls, mass transit, or higher fuel taxes?

    Obviously, its not possible (certainly not easy) to judge at what level of private offset adoption the balance is tipped in favor of their use. My sense is we are not likely to get there anytime soon.

    To me, the most important feature of Private Offsets is that they are geared to higher-income (if not elite) consumers and there is no better way to undermine costly social change than to give this group a way take their own dollars and opt-out.

  2. Carbon offsets ? You must then assume that CO2 is a pollutant then …

    Sorry, its not and as of yet nobody can show that it has had any real impact on the warming we have seen over the last 100 years …

    On the other hand it has had measured impact on food production and crop yields. i.e. less poor people have starved … I’ll take that over .7 degrees per 100 years …

    Carbon Credits are just another scam …

    I’d say your site is well named, you do have a Knowledge Problem … unfortunately its a lack of …

  3. I don’t have to think that CO2 is a pollutant; in fact, I am far from convinced that it is. HOWEVER, what private, voluntary arrangements for carbon offsets do is to allow private parties who DO think it might be a pollutant to take some action based on that belief.

    Think of it as an insurance transaction opportunity, and then you’ll see that such an opportunity takes advantage of distributed, private, diffuse knowledge. Which is what the name of this site is really about.

  4. You are right that carbon offsetting is only criticisable along Ms Taylor’s lines if it miscalculates the carbon benefit, but the sad fact is that most schemes do so miscalculate. The best of them (e.g. planting trees) do actually absorb carbon, but the full lifetime absorption of the trees planted is written down in Year 1, even though they will probably not start absorbing significant quantities for 10 years and then not complete the assumed absorption for another 70 years. This ignores basic time-preference issues, and the uncertainty of the trees’ fate over those 80 years. It’s not very different to Enron’s approach to accountancy.

    Many less creditable carbon-offsetting schemes absorb no carbon at all. Rather, they avoid emitting carbon. Non-emission does not balance emission. Only absorption balances emission. If someone puts up a windmill somewhere, that does not necessarily reduce the amount of carbon being emitted – it may simply increase the amount of energy being consumed. The windmill should not incur a cost for carbon, but it should not be credited with some value for non-existent non-carbon.

    The whole Kyoto-based carbon market is based on a conceptual nonsense, hopelessly confusing carbon-negative, -positive, and -neutral activities and their values. The USA was quite right to refuse to sign up to such a flawed framework, and should stick to its guns for the post-2012 negotiations. That applies as much whether you believe in climate-change theory or not – cosmetic solutions that make people feel better without delivering any improvement (widely favoured over here in Europe) will do no one any favours.

    You are also right that people should be free to make their own, subjective assessment of the risk of anthropogenic climate-change and value measures to deal with it accordingly. Unfortunately, Kyoto and carbon-markets based on it take very little account of issues such as subjectivity, risk and time-preference. This is not a meaningful way of “insuring” against the risk, nor even to contributing to ameliorating that risk.

    For a great example of the idiocies promoted by this approach to carbon valuation, see the recent article in the Financial Times on Chinese HFCs (“China ‘exploiting Kyoto loophole'”, http://www.ft.com/cms/s/9bdda3d4-a676-11db-937f-0000779e2340.html). To me the acid test is forests – a market that encourages planting trees in some countries (still the most common approach to offsetting) whilst providing no incentive for the preservation of critically important forests in other countries (e.g. Brazil and Indonesia) must be conceptually flawed. I understood this to be one of America’s principal criticisms of the Franco-German Kyoto model, and the objection was absolutely right.

  5. You are right that carbon offsetting is only criticisable along Ms Taylor’s lines if it miscalculates the carbon benefit, but the sad fact is that most schemes do so miscalculate. The best of them (e.g. planting trees) do actually absorb carbon, but the full lifetime absorption of the trees planted is written down in Year 1, even though they will probably not start absorbing significant quantities for 10 years and then not complete the assumed absorption for another 70 years. This ignores basic time-preference issues, and the uncertainty of the trees’ fate over those 80 years. It’s not very different to Enron’s approach to accountancy.

    Many less creditable carbon-offsetting schemes absorb no carbon at all. Rather, they avoid emitting carbon. Non-emission does not balance emission. Only absorption balances emission. If someone puts up a windmill somewhere, that does not necessarily reduce the amount of carbon being emitted – it may simply increase the amount of energy being consumed. The windmill should not incur a cost for carbon, but it should not be credited with some value for non-existent non-carbon.

    The whole Kyoto-based carbon market is based on a conceptual nonsense, hopelessly confusing carbon-negative, -positive, and -neutral activities and their values. The USA was quite right to refuse to sign up to such a flawed framework, and should stick to its guns for the post-2012 negotiations. That applies as much whether you believe in climate-change theory or not – cosmetic solutions that make people feel better without delivering any improvement (widely favoured over here in Europe) will do no one any favours.

    You are also right that people should be free to make their own, subjective assessment of the risk of anthropogenic climate-change and value measures to deal with it accordingly. Unfortunately, Kyoto and carbon-markets based on it take very little account of issues such as subjectivity, risk and time-preference. This is not a meaningful way of “insuring” against the risk, nor even to contributing to ameliorating that risk.

    For a great example of the idiocies promoted by this approach to carbon valuation, see the recent article in the Financial Times on Chinese HFCs (“China ‘exploiting Kyoto loophole'”, http://www.ft.com/cms/s/9bdda3d4-a676-11db-937f-0000779e2340.html). To me the acid test is forests – a market that encourages planting trees in some countries (still the most common approach to offsetting) whilst providing no incentive for the preservation of critically important forests in other countries (e.g. Brazil and Indonesia) must be conceptually flawed. I understood this to be one of America’s principal criticisms of the Franco-German Kyoto model, and the objection was absolutely right.

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