The inconvenient truth about the carbon offset industry

It is 20 months now since British Airways (BA) proudly announced a new scheme to deal with climate change: for the first time, passengers could offset their share of the carbon produced by any flight by paying for the same amount of carbon to be taken out of the atmosphere elsewhere. "I welcome warmly this move from BA," said the then environment minister, Elliot Morley. And how much car bon has BA offset from the estimated 27million tons which its planes have fired into the air since that high-profile moment in September 2005? The answer is less than 3,000 tons, less than 0.01 percent of its emissions -- substantially less than the carbon dispersed by a single day of its flights between London and New York. The scheme has been, as BA's company secretary, Alan Buchanan, put it to a House of Commons select committee earlier this year, "disappointing." The project has failed, according to one well-placed BA executive, because one part of the company wanted to improve its image by going green while another part wanted to protect its image by saying nothing at all about the impact of air travel on global warming. The result was that the scheme was launched and then banished to a dark corner of BA's website. That tension -- between the demands of the planet and the imperatives of commerce -- lies at the heart of the global response to climate change and, in particular, of carbon offsetting. The idea that we might cancel our own greenhouse gases by paying for projects that reduce the gases elsewhere was born in the early years of climate politics. It was adopted by the corporate lobby at the Kyoto summit in 1997 and has grown into a large but deeply troubled adolescent -- confused, unpredictable and difficult to trust. Separately from the "compliance market" on which nations and corporations trade carbon credits in an attempt to hit their Kyoto targets, there has grown a smaller, voluntary market in which airlines, banks, car makers and energy companies line up to offset their carbon and to encourage their customers to do the same. A Guardian investigation suggests that many of the schemes on offer here are well-meaning but thoroughly unreliable. One company, Equiclimate, which is recommended by the British government, has sold thousands of tons of offset which are now worthless in financial and environmental terms. It bought up some of the special permits which allow European companies to emit specified amounts of carbon. The idea was to sell them to customers who would "retire" them, thus cutting the amount of carbon which those companies could produce. But the European commission distributed 170 million too many of the permits and so the thousands which have been bought by Equiclimate's customers make no difference at all. People may believe they are offsetting the emissions from their patio heaters by signing up to the Calor Gas offsetting scheme, but the sad fact is that Calor Gas is relying on 5,000 tonnes of EU permits which it bought from Equiclimate when most of the permits were already worthless. "We chose them because they were recommended by government," a Calor Gas executive said. The British government itself has been caught out over emissions from its presidency of the G8 in 2005. The then environment secretary, Margaret Beckett, said that all carbon emissions from all meetings and travel linked with the one-year presidency would be neutralized. Delegates to the Gleneagles summit in July 2005 were given certificates declaring that all their carbon emissions were being offset. But it hasn't happened. The plan was to spend $297,200 in Kuyasa, a suburb of Cape Town in South Africa, refitting shack-like homes with insulated roofs instead of corrugated iron, and providing solar panels for electricity and long-life bulbs for light. But the project, which would cut carbon emissions as well as helping needy people, has run into bureaucratic, financial and practical problems. The environment department, Defra, says it is keeping it under review. The project's leader, Shirene Rosenberg, says she is still fighting to keep it alive with no start date on the horizon. Climate pack withdrawn Following a phone call from the Guardian, the Science Museum has withdrawn its Climate Relief Gift Pack, which included a certificate offsetting 220.5lb of carbon and an opportunity to offset a ton more. The pack promised to "instantly reduce the amount of CO2 emitted into the atmosphere and help reduce global pollution". This was nonsense. The offset, like Equiclimate's, was based on "retiring" EU carbon permits whose supply easily exceeds demand. It was also overpriced. While the Science Museum was offering them at $60 a ton, EU permits were for sale at a few cents a ton. The company behind the scheme, Moon Estates of St Austell in Cornwall, also withdrew the product from sale on its website. A company executive admitted they had sold some 3,000 tons, at a potential total of almost 180,000. Atmosfair, a German offsetting group which is well regarded for its commitment to the environment, undertook to rewrite a section of its website following a phone call from the Guardian. Since 2004, it has been offering air travelers offsets which carry the gold standard awarded by a Swiss-based group backed by dozens of environmental NGOs. In an uncertain market, this gold standard is highly desirable. But none of the five projects on which Atmosfair is relying has yet produced a single verified gold standard reduction in emissions. One project was never intended to reach gold standard; one has been withdrawn; one is stalled. The remaining two -- solar-powered kitchens in India and energy from palm oil waste in Thailand -- are up and running, but neither has yet completed the gold standard process. Atmosfair's founder, Dietrich Brockhagen, acknowledged that what he was selling was "forward" credits even though the two projects might fail finally to generate them. "You have a point, that the customer might not understand this," he said. The problem with offsetting is twofold. First, these schemes are unregulated and wide open to fraud. There is nothing but the customer's canniness to stop a company claiming to be running a scheme which does not exist; claiming wildly exaggerated carbon cuts; selling offsets that have already been sold; charging hugely inflated prices. Second, as all the examples above show, even the most well-intentioned schemes suffer from basic weaknesses in the idea of carbon offsetting -- an idea which flows not from environmentalists and climate scientists trying to design a way to reverse global warming but from politicians and business executives trying to meet the demands for action while preserving the commercial status quo. It fails on at least three essential points. First, it requires an accurate measure of the emissions to be offset. That turns out to be riddled with uncertainty. The UN's Intergovernmental Panel on Climate Change found a margin of error of 10 percent with measuring emissions from making cement or fertilizer; 60 percent with the oil, gas and coal industries; and 100 pecnt with some agricultural processes. Measuring emissions from aircraft is especially fraught with disagreement about what exactly should be measured and aggravated by variations in each flight's height, cargo load and weather conditions. When Tufts University in Maine analyzed offsetting websites, it found emissions for flights between Boston and Frankfurt being calculated at anything between 1.43 tons and 4.14 tons. Second, it requires an accurate measure of the carbon saved elsewhere. Most of the earliest offset projects involved planting trees, which naturally ingest carbon, a complex and unpredictable process which forbids accurate measurement. Projects that focus on energy efficiency are even trickier. Carbon Offsets Ltd, another company recommended by the British government, is selling offsets from a South African project known as Basa Magogo. This encourages poor households who make coal fires in perforated cans called imbawulas to build the fire in a different way: instead of using paper, then wood with coal on top, they are to build them with most of the coal on the bottom, thus producing more heat and less smoke. But how does anybody check how many have built their fires this way? And how many imbawulas must burn this way for how long before a ton of carbon is saved? Hugh Somerville, one of the founders of Carbon Offsets Ltd, confessed that nobody had asked this question before. Finally, the very idea of offsetting relies on what is known as additionality -- evidence that a carbon reduction would not have occurred in the natural order of commercial life. One of the biggest UK offsetters, Climate Care, which is used by the Guardian, distributed 10,000 energy-efficient lightbulbs in a South African township; offered the carbon reductions as offsets; and then discovered that an energy company was distributing the same kind of lightbulbs free to masses of customers, including their township, so the reduction would have happened anyway. The result of these fundamental problems is a crisis of legitimacy in the voluntary market, as offsetters lay claim to certainties that are beyond their reach. Dan Welch, a Manchester journalist who investigated offsetters for Ethical Consumer magazine, summarized it neatly: "Offsets are an imaginary commodity created by deducting what you hope happens from what you guess would have happened." The early forestation projects, so beloved of rock bands, have been discredited. Apart from their inability to make accurate measurements of carbon saved, companies were offsetting immediate emissions with reductions that would occur only during the 100-year life span of a tree. One of the first, Future Forests, was selling offsets from a forest at Orbost in Scotland. Customers may have thought that they were paying for new trees to be planted, but the company's contract with the forest's owner reveals that all they were paying for was the right to claim ownership of carbon absorbed by trees which were planted anyway. The Advertising Standards Authority in November 2002 ruled that Future Forests had misled customers into thinking that their offset money would be used to grow new trees. 'A waste of time' Some tree-planting projects in Guatemala, Ecuador and Uganda have been accused of disrupting water supplies; evicting thousands of villagers from their land; seizing grazing rights from farmers; cheating local people of promised income; and running plantations where the soil releases more carbon than is absorbed by the trees. The idea of buying and retiring EU carbon permits is becoming equally discredited. The first phase permits, which run to the end of this year, are now worthless. The second phase, due to cap the carbon emissions of European companies from 2008 to 2012, are high-risk investments. Nobody knows whether the European commission has got its calculations right this time. Projects that use renewable energy or efficient energy to cut carbon are beset with the uncertainties of measurement and additionality. And many companies are selling speculative "forward" credits: they have hooked up with some third-world project and started selling offsets on the assumption that the project will probably materialize and succeed. One measure of the crisis is the progress of the gold standard scheme, which is backed by Greenpeace and other environmental groups as a particularly rigorous process to ensure that emission reductions are verified, additional and consistent with sustainable development. When the scheme was launched three years ago, it was widely derided. Jasmine Hyman, the gold standard marketing director, said: "The irony is that three years ago, we were defending our right to exist and everybody was saying, 'Stop it with all your rules' and now we are the darling of the dance floor." The scheme has registered seven projects, two of which have so far produced some 350,000 tons of verified gold standard carbon reductions. And suddenly, as so many other projects struggle with uncertainty, it has unfilled orders for eight million more.