Carbon Offsets Get Oversight
Can you construct or operate a building without emitting greenhouse gases? Probably not, but the voluntary carbon-offset market offers an alternative: pay a fee to finance reductions of greenhouse gases or sequestration of atmospheric carbon, elsewhere. In 2007, the Aldo Leopold Legacy Center earned an innovation point in LEED on its way to a Platinum rating for achieving carbon neutrality with the help of carbon offsets. The project offsets emissions from its energy use with carbon sequestration from improved forest management nearby.
The voluntary carbon-offset market, soon projected to be worth billions of dollars by 2010, has been plagued by doubters who see offsets as a means to reduce the customer’s guilt, not carbon emissions. New developments in the field, however, including a Green-e standard and labeling program for offsets and potential oversight from the Federal Trade Commission, may bring more discipline and trust to the market.
The voluntary market for renewable energy certificates (RECs), which are similar to carbon offsets but deal instead with offsetting the use of conventional electricity (see EBN for more), has for years benefited from the third-party Green-e certification provided by the Center for Resource Solutions, a California-based nonprofit. One of several standards for RECs, Green-e is the most widely adopted, including in the LEED rating systems.
Now there is also Green-e Climate, launched in February 2008 after more than a year of work through a transparent, stakeholder-driven process. Lars Kvale, the Green-e Climate manager at the Center for Resource Solutions, said that the program tries to ensure that “when you purchase one ton [of carbon emissions reductions], you know where it’s coming from, and you know that it’s real.” Green-e is not the first program to provide that verification, but it is the first to focus on the voluntary, not the regulated, market and to provide a product label from an established brand supported by a published standard.
Green-e works by setting standards for both where an offset comes from and how it is sold. Since offset buyers want to reduce emissions, they assume that their purchases are funding projects that wouldn’t have already happened under “business as usual.” This assumption, referred to as additionality, is hard to define in practice. “There is significant disagreement among stakeholders about which [additionality tests] work,” says Kvale. Rather than using a single test, Green-e requires a series of tests that together screen out inappropriate offsets. Projects producing Green-e offsets must come from 2000 or later, and any carbon reduction mandated by law is ineligible. Projects must also pass one more test, but project teams can choose from among three: one showing that the revenue from the carbon offsets made the project possible; one showing that the project is not business as usual in the relevant economic sector; or one showing that the project uses “groundbreaking” new technology. Finally, companies must follow specific accounting standards and disclose certain information about their offsets, such as what location they come from and what types of projects they support.
Offset producers must also verify their offsets through one of Green-e’s endorsed programs: the Clean Development Mechanism (CDM), which was established as part of the Kyoto Protocol; the Voluntary Carbon Standard, a system established by a group of organizations; and the Gold Standard, another voluntary standard developed by nonprofits. Green-e specifies implementation options with each of these that avoid their shortcomings. In choosing those programs, Kvale says, “We reached out to anyone we could think of [and ultimately focused on the ones] we feel are legitimate,” using a set of criteria including transparency and development with stakeholder input. One notable program not included is the Chicago Climate Exchange (CCX), which pioneered offset trading but which has been criticized for problems with offset quality. (CCX did not respond to requests for comment for this article.)
Carbon-market expert Mark Trexler, Ph.D., managing director of the Eco-Securities consulting service, said that with Green-e Climate, the Center for Resource Solutions is “having a lot of success building on its previous Green-e brand.” He raised concerns about how Green-e offers producers a choice of additionality tests, however, worrying that “people can avoid the ones under which they don’t succeed.” He added, “It increases the potential for false credits to sneak in.” Trexler also has worries about whether mechanisms like CDM that Green-e relies on are proven in protecting offset quality. Citing a World Wildlife Fund study showing that 20% of CDM projects aren’t additional, he said, “It’s hard to get a project through the CDM, but that and whether it’s a quality project are two different questions.”
So far, four companies are offering Green-e certified offsets: 3Degrees, the Bonneville Environmental Foundation, Community Energy, and Renewable Choice Energy. “This is the highest standard in the industry to ensure credibility and safeguards,” said Jack Hardy, a spokesperson for Bonneville, a nonprofit based in Portland, Oregon. Bonneville is participating, he said, to communicate to customers that “they’re getting what they’re paying for.” All four companies separately offer RECs certified by Green-e.
The Federal Trade Commission (FTC), which enforces federal laws prohibiting false or misleading marketing, also noticed recently that offset customers might not always be getting what they’re paying for. Since 1992, FTC has published the Green Guides, which define common environmental claims like recycled content and biodegradability. FTC last updated the Green Guides in 1998 but began a review in January 2008, a year ahead of schedule, in response to the recent increase in environmental marketing. In its first public hearing, FTC looked at carbon offsets and RECs, listening to testimony from numerous parties, including the Center for Resource Solutions (the group behind Green-e). FTC did not signal what approach it might take with carbon offsets and RECs, and FTC spokesperson Frank Dorman said that any decisions on revising the Green Guides would take place after an undetermined number of hearings.
FTC’s interest is a reminder that the federal government is largely waiting in the wings on carbon regulation. Kvale says he expects that government will step in sooner or later, but that even when it does, the voluntary market will still be relevant. “Most consumers and most companies will not have a cap,” he predicts, but many will want to reduce their emissions. Even companies that have a cap may want to do more. He also speculated that any system would take years to go into effect, leaving the voluntary market as a way for people to act sooner.
For more information:
Center for Resource Solutions
Federal Trade Commission