Sunday, March 28, 2010

What are the alternatives to carbon offset / carbon neutralise emissions?

In our last blog “What’s in a carbon offset” we looked at the value of neutralising carbon emissions. We concluded that more and more people are using carbon offsetting, believeing that it will reduce carbon emissions. But the question still remains, does a carbon offset really help to reduce carbon emissions. The fact is, the degree of success depends on the type of credit used. Let’s look at the types of credits available.

Basically there are three types of carbon credits used to offset carbon emissions. For the sake of this blog I am going to refer to them as Tree Credits, Renewable Energy Credits and Carbon Emissions Credits. Though technically speaking when most people think of offsets they are referring to Tree Credits and Renewable Energy Credits. Carbon Emissions Credits offer a powerful and effective alternative because they can be used to actually reduce carbon emissions. But more about that soon, for the moment let’s look at the three options:

Tree Carbon Offsets1. Tree Credits. These credits are generally made from growing forests or stopping forests being cut down. The trees sequester (suck) the carbon dioxide from the atmosphere, helping reduce carbon in the atmosphere. Now, while we love trees and always need more of them there are issues with using them as carbon credits. The band Cold Play found this out recently when their efforts to neutralise their concerts backfired. Their credits were based on mangrove plantations. The mangroves died.

The issues also include the centuries-long management processes required to ensure the trees live healthily. As a purchaser it is difficult to police how the money spent and whether the trees actually survive long enough to suck up the carbon dioxide you paid for. But most of all, it is reactive. It deals with the carbon emissions after they have occurred rather than stopping them from ever occurring.

The reality is we already emit more carbon dioxide that we can plant trees!

2. Renewable Energy Credits. These credits are created from projects to produce renewable energy or trap greenhouse gases. The carbon credits represent the emissions that would have been caused had the renewable project not occured. Ie if the hydro dam was not built a coal fired power station would have been. The money from the carbon credits is used to fund the project. The idea is that carbon emissions have been avoided and therefore can be made into credits and used to offset emissions somewhere else in the world.

This is a noble cause as a large number of these projects occur in developing countries. The poor living standard and fast paced growth in these countries requires enormous amounts of energy. Renewable Energy offset projects help fund this low carbon growth. That’s why they are an appealing option because you are helping to fund a project that reduces emissions, gives power to communities and creates employment.

Renewable Energy and Greenhouse Gas Trapping Offets
However, there are risks with creating carbon credits from these projects. Mostly the question of additionality; would the project have occured without the carbon credits? If so the carbon credits have no value as offsets because they have not actually reduced carbon dioxide. International Rivers has been reporting on this for years. There is also the question of the impact on the environment on the value of the credits. Ie. If a hydro dam is built what is the impact on the people, the forests that were in the valley (a carbon sink) and the downstream community reliant on the water?

3. Carbon Emissions Credits. These credits are created by schemes to limit the amount of carbon emissions from industry. These schemes, often referred to as cap and trade or emissions trading, provide a limited pool of carbon credits, credits that industry requires in order to legally emit carbon dioxide. The credits are regulated by the government. In a well designed scheme like the European Emissions Trading Scheme, emitters are heavily penalised if they do not have sufficient credits. The idea is that each year fewer and fewer credits are issued so that the emissions reduction targets are met.

While these carbon emissions credits are required by the regulated industries they can also be used voluntary, providing an alternative to the classic carbon offset of Trees and Renewable Energy above.
Carbon Emission Credits - a better carbon offset
The advantage of voluntarily cancelling carbon emission credits is that it reduces the credits available to emitters. This encourages emitters to be innovative and to develop low-carbon solutions.

Think about it this way, cancelling carbon emissions credits is proactive emission reduction, because the right to emit carbon is cancelled before it is used. Using these credits voluntarily also provides certainty and security because the transaction is transparent and can withstand the scrutiny of market regulators.

As Paul Gilding, ex CEO of Greenpeace, said in his recent article “How to carbon offset your family holiday”, retiring carbon emissions credits may not be the most exciting form of reducing emissions but it is the most pure.

More and more individuals and businesses are using carbon credits to neutralise their carbon emissions. There are several carbon credits to choose from. The characteristics of these carbon credits can be represented by a spectrum of quality.

Hopefully as people become acutely aware of the issues surrounding damaging climate change, and as they become more educated about the different types of carbon credit, more people will choose to use the most pure form of reducing carbon emissions by cancelling carbon emission credits.


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