Carbon Offsets
This is an expense that an organization can incur to “offset” their carbon emissions. If a company outputs 100 tons of CO2 each year, they can give money to organizations that theoretically enable the removal of that same amount of C02, thus “making up for their sins,” in some sense.
Carbon offsetting can be voluntary or required by regulations.
It’s not an exact science, because how can you determine if an organization effectively removes carbon from the air?
Wikipedia lists these types of projects as examples of carbon offsetting:
- Renewable energy
- Methane collection and combustion
- Energy efficiency
- Destruction of industrial pollutants
The problem is that these are all wildly indirect. It’s easy to measure how much CO2 an organization outputs, but how do you measure how much an organization or project negates? Also, how do you verify that this is additional removal, meaning removal that would not have otherwise taken place if the offset had not been purchased?
Some organizations object to the idea that organizations can just “pay to pollute,” essentially.
Greenpeace:
[…] carbon offsetting transport falls very short. Paying lip service to action, and piecemeal measures are not an option. It’s time for strong words to be matched with strong action.
The Institute for Applied Ecology:
Overall, our results suggest that 85% of the projects covered in this analysis and 73% of the potential 2013-2020 Certified Emissions Reduction (CER) supply have a low likelihood that emission reductions are additional and are not over-estimated.
Several organizations offer carbon offset purchasing. For instance, at Carbonfund.org you can purchase an offset for a married couple for $600, or they have a calculator for your small business to determine what your output is. To be clear, voluntarily “purchasing” an offset from an organization like this is just a charitable donation to an organization that will distribute the money to other organization who claim to help the environment.
What business are looking for is to be able to announce that they are “carbon neutral,” which means they have purchased the same amount of carbon offsets as they output in CO2. They are essentially purchasing the right to make a claim that they care about the environment.
The costs of carbon offsets vary, and there’s an extensive secondary market where you can purchase a carbon offset from someone who purchased it but doesn’t “use” it by outputting the CO2.
Ecosystem Marketplace did a survey on the average costs in the voluntary carbon offset market, and found these prices:
- Renewable energy projects cost $1.40 to offset 1 ton of CO2 output
- Forestry and land use projects: $4.30
- Waste disposal: $2.50
To put it in perspective, one semi truck operating 120,000 miles a year outputs 223 tons of CO2, meaning the cost of offset it would be anywhere from $300 to $1,000. Walmart currently operates 6,121 such trucks (Walmart Trucking Fleet Fact Sheet (PDF)). To voluntarily offset their entire fleet would cost between $1.8 million to $6.1 million.
Why I Looked It Up
I had just always wondered. Specifically, I had wondered what “carbon neutral” meant. I thought it meant the organization wasn’t actually outputting anything, but now I know it just means they’re paying money to claim that their output is negated through other means.
Postscript
An article in the Wall Street Journal entitled Companies Are Buying Large Numbers of Carbon Offsets That Don’t Cut Emissions covers the controversy I discussed above. It discusses 300,000 credits that Delta Airlines bought from an Indian wind farm that was steadily profitable and stable.
Transactions like this undercut the basic concept behind carbon offsets – that they should fund green projects that wouldn’t be possible without the additional cash they bring. Now that renewable energy can stand on its own financially, some investors, researchers and government regulators say companies buying these credits are just transferring cash to other established companies. They say the old U.N. program, which spawned thousands of similar projects and makes up a large chunk of the market for offsets, is draining money from newer initiatives that need it more, such as experiments in capturing carbon directly from the air.
Postscript
Added on
An article in The Guardian entitled Revealed: more than 90% of rainforest carbon offsets by biggest provider are worthless, analysis shows future discusses the controversy:
The research into Verra, the world’s leading carbon standard for the rapidly growing $2bn voluntary offsets market, has found that, based on analysis of a significant percentage of the projects, more than 90% of their rainforest offset credits – among the most commonly used by companies - – are likely to be “phantom credits” and do not represent genuine carbon reductions.
Postscript
Added on
Delta Airlines is being sued over carbon offset claims:
Defendant’s claim of carbon neutrality therefore hinges on an underlying set of representations – that since March 2020 Defendant’s investments in the voluntary carbon offset market have entirely offset the CO2 emissions from Defendant’s global airline operations, such that Defendant has not been responsible for releasing additional carbon into the atmosphere during that time.
Plaintiff has since discovered that any such representations are manifestly and provably false.