What is up with the price of carbon offsets?

Great Debates
1

I am posting this in GD because I feel it will end up there eventually.

I recently bought a gas-guzzling SUV that gets about 15 mpg. I feel like I should do the right thing and not contribute to the end of civilization as we know it, so I decided to look into the price of carbon offsets.

Assuming I drive about 15,000 miles per year, this works out to about 10 tons of CO2 emissions per year. The Nature Conservancy uses $15 / ton as the cost of carbon offsets. I have seen numbers elsewhere as high as $30 after some brief Googling.

Even so, that’s nothing! At $4 / gallon I will spend $4,000 on gas this year - is it really the case that totally negating my carbon emissions would cost only an additional $200 - $300 dollars?

What is going on here? That implies the entire US automobile fleet could become carbon neutral if we added between $0.15 and $0.30 to the price of gas. I find it hardly to believe that it would be that cheap. What am I missing?

2

I don’t know exactly how TNC offsets your carbon emissions, but my guess is that what they’re doing will work well if 10,000 people take them up on it, but will start to fall apart if 100,000,000 do.

I assume the bulk of their plan is some combination of “plant trees” and “prevent trees from being cut down.” It’s easy to do now because there’s cheap land you can buy to protect or plant trees on. But it will quickly become impractical once all the low-hanging fruit (cheap land suitable for forestry) is exhausted. So your $300 will maybe plant 50 trees, or preserve an an acre or so of forest somewhere from being cut or burned down. Multiply that by 10,000 similar people and you’ve got maybe a million trees planted, or a few tens of thousands of acres of forest protected. But multiply that by the population of the United States, and all the sudden they’d have to find room to plant billions of trees, or protect an area of forest similar in size to the state of Alaska.

3

Real Climate, 2006: What about the discrepancy between the huge projected costs for nation-scale carbon cuts versus these cheap fixes for the emissions of an individual? I believe what we are looking at is a situation known as “low-hanging fruit”. If everyone in the U.S. decided to become carbon neutral, the price for doing it would rise, because the easy fixes would be used up. So the CO2 emission reductions achievable by purchasing of carbon offsets, at the low, low price of $99 per year, are almost by definition small relative to the overall scale of the problem. It would take more than $99 per American to prevent global warming; for that we will have to actually reduce our CO2 emissions. Carbon offsets cannot do it alone.

Carbon offsets are beneficial in the meantime, however, because they do cut carbon emissions, and the money stimulates development of alternative energy technologies. The bottom line is, despite my deep initial skepticism, I now see how carbon offsets could actually work as advertised, enabling an individual to live a carbon-neutral life, even in the United States. This is a terrific idea. Sign me up! RealClimate: Buying a stairway to heaven?

The author is skeptical of land use techniques though. Carbonfund.org offers 3 broad categories of carbon offsets: renewable energy and methane, energy efficiency & carbon credits, and reforestation (land use). http://carbonfund.org/projects

4

I deal with this a little bit first hand, so here’s the background on carbon credits.

Carbon credits come from various registries or programs such as the Climate Action Reserve (CAR), Voluntary Carbon Standard (VCS), Clean Development Mechanism (CDM) and other programs. To acquire greenhouse gas (GHG) credits, a project must demonstrate that they are reducing GHG emissions (or increasing carbon storage in the case of forestry or land use projects) above and beyond “business as usual” (BAU). Examples of these projects include forest preservation, early destruction of landfill methane, destruction of ozone depleting substances, and destruction of manure lagoon methane.
The various registries offer different approaches. Some require that each project demonstrate that the reductions are better than BAU, others develop protocols such that any project meeting the definition in the protocol will be better than BAU. Credits are typically awarded annually.
The problem this many registry, many program approach has is that not all credits are created equal. A landfill credit is worth a lot less than a forestry credit due to the charisma of the industries involved. I doubt the Nature Conservancy wants to say they’re paying a landfill to reduce pollution, but it’s great press to say they preserved 100 acres of forest.
Another factor is the quality of the program issuing the credits. The Chicago Climate Exchange (CCX) used to be a substantial market for credits, but their prices plummeted. My understanding (and I was not involved in CCX, so I cannot speak as an expert about it) is that the perceived value of a credit on the CCX was less than CAR because the CAR program was more rigorous and the CCX program “leaked” emissions. (“Leakage” is where emissions are essentially moved out of the project boundary and emitted elsewhere, meaning the project reductions were not “real.”)
A new wrinkle has developed in the California cap and trade program, where certain credits can be used to offset emissions. Landfills are out of the program, so they’re not nearly as valuable as forestry credits, which are in. The last time I dealt with pricing, landfill credits were the bottom of the range at about $3/ton. Credits eligible for the cap and trade program are probably about $15/ton, but the market is brand new and could swing. For comparison, CCX credits were trading for $0.1/ton before they folded. Credits also have higher value if they’re “guaranteed,” meaning that the project will provide credits even if that project didn’t generate the promised credits for any number of reasons.

The difficulty with offsetting all the emissions from vehicles is credit availability. We’ve gone over the low hanging fruit. Even then, some projects lose money. Only so many landfills have viable methane destruction projects (and they tend to be short lived), and manure projects are marginal to begin with. To get enough projects to offset the entire US vehicle fleet would require a substantial rise in the price of credits to pay for projects that are not so easy to develop.

Out of background land and into my opinion.
I like the concept of carbon credits. They provide a financial incentive for emitters to reduce emissions. I hate the way it’s implemented and presented to the public. I work in the industry and I can’t tell you if most “Offset your emissions here!” offers are worth a penny. I recognize a few names because I work in the industry, but 90 percent of the time, I have no idea if the credit they’re offering is real or not. I can’t imagine the general public has any idea where that credit comes from. The Nature Conservancy does a good job of disclosing the projects they’re using to offset your emissions. As expected, they’re a couple of forestry projects under CAR. I think they’d do well to acquire cheaper credits, but I’m involved in the landfill industry and have no qualms about dealing in those credits.
The credits generated by some projects are absolutely real. Landfill methane destruction, manure lagoon methane destruction, and ozone depletion substance destruction certainly reduce GHG emissions. Like the author quoted by Measure for Measure, I have my reservations about land use projects, which include more than just forestry projects, but biochar, wetlands restoration, and other types.

5

For fifteen dollars all you get is the budget carbon offset plan. That’s where they come to your house and slash your tires.

6

I see. So, it comes down to two things: the cheapest carbon offsets are cheap because their actual integrity is questionable (i.e. they may not actually achieve the promised reduction in CO2 emissions), and even the more expensive carbon offsets are still relatively cheap because they represent low-hanging fruit that would not scale to large quantities.

I would extrapolate from this to conclude that the prices are low because, despite all the hysteria about global warming, there’s little demand for carbon offsets at the moment.

7

Where can I go to speculate on assanine beaurocratic regulation offsets?

(That’s right…can’t spell worth a damn and don’t much care)

8

Assanine bearocratic regulations mean that you’re not allowed to kill grizzlies even if you’re attacked.

9

Of their perceived value to the buyer is lower. It’s better for Manufacturer Inc. to say they offset their emissions by preserving 100 acres of forest than by lighting a flare at a landfill.

I think that the major carbon offset registries active in the US are legit and that any project listed has resulted in some reduction in GHG. I’ve only worked under one, but the programs have worked out the kinks in the early programs. Being sure that GHG reductions are “real” is far more challenging than it appears on the face. Look for registries that require verification.

It’s not a question of scaling, it’s a question of cost/benefit. The existing credits were inexpensive to develop. There are other potential projects, but they won’t be implemented unless the cost of credits goes up and the cash flow begins to pencil out.

Exactly. There’s a new compliance market in California, but only a fraction of the total market will be eligible for the CA market. It’s the first application of credits for something other than “warm fuzzy feelings.”

10

If you truly are concerned about carbon offsets for your life choices, you should probably be more concerned with where all of your food comes from over your lifetime and the amount of CO2 generated to produce that food, than what type of car you drive.

11

Is this a whoosh? People actually drive big gas guzzlers, but then pay someone else to plant trees and they feel good that they aren’t polluting the environment? How’s that different to donating to charity and then robbing them at gunpoint later that night?

Why not plant trees and buy a fuel efficient car? Do double duty?

12

It’s common enough for there have been articles like this deriding the practice.

13

I wonder if waste water treatment plants could sell carbon credits by capturing methane.

Find me a fuel efficient minivan. And frankly the hybridization of a lot of cars is more expensive than carbon offsets.

Its like killing dolphins with your tuna nets and donating money to save the whales

14

There is an article in this week’s issue of The Economist that says the current cost of carbon capture / sequestration technologies for coal power plants is somewhere between $50 and $100 per ton of CO2 emitted.

This seems to be a fairly good upper limit on the cost of carbon offsets in the medium term - even once you have run out of landfills or whatever, you can always sell carbon offsets based around installing carbon sequestration technology in existing coal plants. Obviously this market will saturate eventually as well, but that will take a while, and at that point alternative technologies should be available.

I am still rather surprised that this works out to a cost of only $0.50 to $1.00 per gallon.

If you are doing something that results in excessive carbon emissions, paying someone else to remove an equal (or greater) amount of carbon from the atmosphere is a perfectly reasonable solution. I don’t understand what your objection is.

You can always ask “Why don’t you do more?” Donate more to charity, plant more trees, use less hot water, have fewer kids, etc. For me, personally, totally zeroing out my carbon emissions is satisfactory, and I don’t feel obligated to do more. YMMV.

15

You should have signed up when they had the unlimited plan, you would have been grandfathered then :slight_smile: