Carbon Offsetting- Tackling Climate Change, or Just Hot Air?
By Nick Funnell
Friday 10th August 2007
At a press conference in New Delhi earlier this year, Indian entrepreneur Vinod Kumar Agarwal announced his great carbon-reducing invention to the world.
He claims to have solved the issue of traditional Hindu funeral pyres releasing around eight million tonnes of carbon dioxide annually into the atmosphere with his Mokshda Green Cremation System. The system, featuring marble flooring and a statue of the god Shiva, was developed in close consultation with government, religious and environmental groups. Agarwal claims it consumes only a quarter of the wood required by a traditional pyre, reducing carbon emissions by up to 60%. Although this innovation has direct environmental benefits for India (such as less polluting ashes to be dumped into rivers), Agarwal was particularly excited over discussions held with “a UK-based carbon broker, to see if our pyres can deliver carbon credits.”
Carbon- the New Commodity
It was neither accident nor commonwealth ties that drew Agarwal to the UK in pursuit of trading the credits he claims his invention will generate. London is the world capital to a whole new breed of city slicker- the carbon trader. Relatively young hotshots like Louis Redshaw, at 34 already the head of environmental markets at Barclays Capital, are looking to take a slice a market currently worth about $30 billion annually, but which could grow to $1 trillion within a decade. Carbon traders and investors may not yet make the same staggering amounts of money as some of their other City counterparts, but seem to feel compensated the warm green glow of their activities. "I don't have to compromise on anything when I get out of bed in the morning" says Redshaw, whose CV includes a rather less edifying spell as an energy trader at financial disaster-zone Enron.
‘Carbon trading’ is an umbrella term covering a range of schemes, but probably the most widely publicised activity is that of carbon offsetting . This involves both individuals and companies being able to ‘offset’ the carbon emissions their activities generate by paying for carbon reduction schemes elsewhere- sometimes forests or windfarms in the UK, but often for projects on the other side of the globe. Companies such as BA, BP and Sky are keen to be seen by the public as being in the offsetting vanguard. Sky in particular has announced the achievement of becoming the first carbon-neutral media company. By working with the Carbon Neutral Company, Sky has managed to totally offset its unavoidable CO2 emissions, calculated at 41,411 tonnes a year. HSBC and others have stated their intention to strive for carbon-neutrality in the near future.
A Stern Test- with the Government’s Blessing
Carbon trading may now have all the appearances of free-wheeling capitalism, but it is a market created entirely by governments’ policies. Envious New York commodity traders can only champ at the bit when they see the London carbon market’s boom of recent years- the sceptical President Bush’s refusal to ratify the Kyoto Protocol has led trading there to wither and die.
In stark contrast, the official view promoted by the British Government was set out last year in a doom-laden 700-page report produced for them by economist Nicholas Stern. The main headline conclusion of the Stern Review was that failure to invest in preventing climate change could risk future global GDP being up to twenty percent lower than it otherwise might be . Chief among Stern’s recommendations for tackling the issue was the wholesale adoption of emissions trading schemes, in order to drive “tens of billions of dollars each year” into low-carbon development around the world.
While many have severely criticised Stern’s assumptions as being wildly over-pessimistic (a senior member of the Intergovernmental Panel on Climate Change (IPCC) stated, "If a student of mine were to hand in this report … I would give him an 'F' for fail.”), former Prime Minister Tony Blair stated that the Review demonstrated scientific evidence of global warming was "overwhelming" and its consequences "disastrous" if the world failed to act. And, as a farewell hand-grenade tossed to the business community just before leaving office this year, Blair pushed through a white paper that could force up to 5000 UK supermarkets, pubs, banks and hotel chains into mandatory carbon trading schemes by 2009.
Criticisms- in Theory and Practice
The trade in carbon emissions is currently the source of fierce argument on all sides of the environmental debate, often setting former green comrades at each other’s throats. Certainly, seeing City carbon traders earning increasingly large bonuses must be a bitter pill to swallow for many campaigners- but if their dealings produce the right results, who cares? However, many have doubts concerning both the basic validity of carbon trading schemes, and their ability to produce real benefits.
Veteran British environmentalist George Monbiot has compared the practice of offsetting with that of buying Papal ‘indulgences’ in the Middle Ages- where those who could afford to could simply purchase forgiveness for their sins rather than actually mending their ways. This moral argument has some weight if offsetting is all companies do to tackle climate change, while still polluting as badly as ever.
To be fair to Sky, their carbon-neutral strategy clearly states that they made great efforts to first reduce emissions (down by 47% on worksites), and only then offset the hardcore of unavoidable emissions. As long as others follow a similar strategy, it’s surely hard to object.
- Timescales of offset- ‘doing an Enron’?
Planning on planting a few trees to offset the carbon produced by your trans-Atlantic flights? The problem here is that it takes years- decades even- for your saplings to reduce CO2 by enough to fully compensate.
Earlier this year Climate Trade Watch accused carbon offset companies of doing with emissions exactly what collapsed energy trader Enron did with money. By counting the future benefits of carbon reduction schemes as if they can be fully banked against emissions made today, they are effectively using the dreaded ‘future value accounting’ in their calculations. Unfortunately the environment can’t wait forever to rebalance- sooner or later the carbon debt must be repaid upfront.
In the meantime, your trees could of course die or be chopped down, bringing an abrupt halt to any future carbon-reduction value whatsoever.
- Local environmental and economic impacts
Many offsets rely on carbon reduction schemes on the other side of the globe- often in developing countries. The dangers posed to fragile ecosystems and economies, sometimes amplified by the actions of rapacious local speculators and government officials, mean that offsetters must tread carefully.
Already several projects have come in for heavy criticism, for example two schemes to plant thousands of acres of eucalyptus and pine in Ecuador and across Uganda, Tanzania and Malawi. Both projects were accused of destroying valuable local ecosystems by introducing exotic tree species and releasing soil carbon into the atmosphere. In addition, they may well have done harm to local communities , especially the African scheme, which forced people in five communities off their lands after suspiciously cheap 50-year leases were obtained on land near Lake Victoria.
At their worst, many of these schemes could be seen as rich nations paying developing countries not to develop, merely employing them to tend ever-expanding forests and other eco-projects to offset our polluting lifestyles- an invidious new form of colonialism. This prospect is particularly galling for the many economists who say the best solution to global ecological problems is precisely through promoting development, believing environmentalism is a luxury only wealthier nations can afford. Countering this, the Stern Review makes pains to state “Action on climate change…need not cap the aspirations for growth of rich or poor countries”.
- It would have happened anyway- Additionality
An important principal outlined in the Kyoto agreement was that of ‘additionality’- that for benefits to be counted for offset the carbon reduction scheme must not have happened without the offset funding .
A recent investigation into offsetting by the Channel 4 Dispatches team revealed the additionality principal to have been breached on numerous schemes. For example, our carbon-neutral friends at Sky currently fund a hydro-power plant in Bulgaria turning water into low-pollution electricity. Interviewed on camera, the manager said that Sky's money was welcome but "not required" - a view backed by the Bulgarian bank which lent the capital. The manager later retracted his comments and the Carbon Neutral Company insisted the money had been critical in establishing the plant. Similarly, a forest in Northumbria used for offsetting was found to have been 70% funded by the Forestry Commission.
If a business venture doesn’t work, the results should be obvious- not enough money coming in means that the bank get twitchy and creditors don’t get paid, leading to eventual collapse. But who would know if a carbon-reduction scheme fails to produce the benefits claimed if everyone involved- as with the Emperor’s new clothes- maintains silence or untruths?
The Channel 4 team focussed on one large pig farm in Mexico, where a project funded by BP involves the siphoning off of the methane produced by the animals’ excrement. Unfortunately, a cursory investigation revealed savings to be barely half those publicly stated, prompting swift amendments to the carbon-reduction claims on the BP website when challenged.
Supporters of offsetting such as Climate Care argue that international standards have been introduced to ensure projects demonstrate that “real, additional and verified reductions” have been made, and that just because a project falls short of delivering the estimated benefits it isn’t thereby completely invalidated. True, the standards may be there, but their current coverage and levels of enforcement do seem patchy at best.
- Lack of agreement over the science
So, just how many trees do you need to plant to fully offset your long-haul flight? Here’s where the fight for your credits just begins…
Measuring carbon footprints is never easy, especially when offsetters disagree so fundamentally over issues such as the ‘multiplier’ effect for aviation fumes. This states that emissions should be multiplied by a factor (some say 3, others more) to take account of its greater effect of their release up in the stratosphere. Unfortunately, the scheme used by BA (run by Climate Care) uses- no multiplier at all. This contrasts with Climate Care’s own aviation calculator, which uses a multiplier of 2!
Climate Care do say they are not fully happy with the parameters of the BA scheme, which was set up “using data from BA’s specific fleet of aircraft”- but that even a flawed offset scheme is better than none at all. However, such significant variations in measurement will surely cast severe doubts in consumers’ minds over the validity of the whole exercise.
So there you have it- carbon offsetting currently seems to be in a confused state, dogged by uncertainty, PR, lack of universal standards and questionable practices. Still, one shouldn’t use all this as an excuse to do nothing. Myself, I’ll be booking my low-carbon cremation now- at least I can help to reduce my carbon footprint on this earth while leaving it.
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