Comments Adam Stein has made

Good point

I was wondering how to get trains in there. I updated the post.

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I know

Making the qualitative observation that rising oil costs have changed consumer behavior for automobiles does not imply that CO2 prices would do the same.

I'm not really making that argument at all. I understand that even a hefty carbon price has a fairly small relative impact for transportation. (I think the tendency to use short-run demand elasticities for gasoline as an indication that people don't respond to price changes paints a somewhat inaccurate picture, but let's assume that people will want to drive a lot no matter how expensive gas gets.)

But I don't think I'm the one mixing and matching. It doesn't make sense to say that a) carbon prices don't matter and b) hybrids will drive conventional cars out of existence in less than ten years if oil prices rise. (a) is a statement about people's demand for driving. (b) is a statement about what people will choose to drive. People tend to conflate these two things, but they are very different, and it does seem that the price of carbon matters.

Likewise, efficiency mandates aren't what has driven the rapid adoption of hybrid electrics to date. CAFE requirements are far, far below the performance of the most efficient cars on the market. And recently gains in fleet average efficiency in the U.S. have actually outpaced the CAFE requirements.

So, again, this notion that pricing is hopeless and efficiency mandates are the only thing that make a difference in people's consumption choices doesn't map very cleanly to reality.

In the end, Romm and I and everyone think that both carbon pricing and efficiency standards are important elements of holistic greenhouse gas abatement strategy. But this notion that carbon prices have to reach a certain level to work is, I think, somewhat misdirected -- and you yourself have had a bunch of smart stuff to say about how a low carbon price is a sign of a successful policy.

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So, yeah

This post has pretty much nothing to do with the Volt. Pay no attention to the cute headline at the top. Point is, efficiency improvements with up-front capital costs look less attractive during a recession. Substitute CFL, solar water heater, what-have-you for the Volt.

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Linky links

Jon -- that sounds about right, although your described solution is actually better than what's currently proposed. There's a pretty good (and short!) breakdown of the problem and the range of possible solutions here.

Two other links, just for fun. First, there's this one describing the skepticism the proposed bailout is meeting in Congress. This is heartening, because the carte blanche bailout does seem like a pretty terrible idea. But I also noticed this sentence (referencing an alternative bailout proposal): "A similar approach was used successfully in Sweden in the early 1990s when its financial system melted down." Point being, there are useful interventions available to the government.

Second one is this one, questioning whether a bailout is even necessary. Most observers seem to feel that something should be done, but it's always worth considering the contrarian view. Perhaps a much smaller intervention is in order.

Finally, I can't see how this issue possibly hurts Obama more than McCain. Pocketbook issues, scandals involving lax regulatory oversight, and mistrust of Wall Street are all factors that tend to favor Democrats.

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Mebbe

Tom -- no argument here. But there are an awful lot of perps in this case, talk of "masters of the universe" notwithstanding, and fixing the problem really is a priority right now.

Jon -- I don't know the answer to that question, although I don't think your analogies really hold. The financial system today is a lot different than it was in 1931. And Japan faced a set of structural issues that I'm pretty sure don't really pertain either. I haven't heard many people suggesting that the takeover of Fannie Mae and Freddie Mac was a bad idea. So, yeah, I'd guess that there are plenty of steps the government can take to stanch the flow. As always, the devil is in the details on this stuff.

As for Wall Street, there seems to be a confusion of issues here (which isn't surprising -- these issues are confusing). But a bailout doesn't have anything to do with ensuring a steady supply of exotic derivatives. It's much more fundamental than that, and it runs deeper than a collection of banks clustered in lower Manhattan.

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Ah, yes

That's certainly true. In fact, I've got another post on that coming up.

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Not a big deal

Funny, I was just reading about Lehman's carbon desk yesterday and wondering whether they have any projects we can try to rescue. (Answer: no.)

But basically this doesn't really matter much. Lehman appears to have a stake in 10 Chinese CDM projects. These projects will retain their value regardless of what happens to Lehman, and presumably the stake will be sold on to some willing buyer. My guess is that this will have absolutely zero effect on the projects themselves.

And of course Lehman's trading desk is now gone, but it was small and the exit of a trading desk doesn't really affect the market much anyway.

More generally, though, the general financial badness does have all sorts of effects on the development of renewable energy. Carbon markets are a small piece of this picture. Large renewable energy projects are funded through complex transactions involving lots of equity and debt. When banks start going down, well, lots of stuff happens. But basically it gets harder to find capital for projects. Lehman was apparently a particularly big player in solar.

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It's here

http://rael.berkeley.edu/old-site/renewables.jobs.2006.pd ...

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Heh

JMG, I can't imagine you read anything I write without thinking about how it relates to my position as a seller of carbon offsets. It definitely goes a long way toward explaining your knack for failing utterly to engage with my actual points, and ascribing arguments to me that I never actually make.

Likewise, I can't really read anything you write without thinking of your constant retreading of tiresome Kunstlerisms; your self-described status as a misanthrope; your bottomless disapproval of others; and your evident glee explaining to them why they suck. You say you want to inject more moralism into your favored positions? Shocker! Maybe you can write a blog post explaining what circle of hell cap-and-trade proponents will be consigned to.

What's the proper level of moral discourse for a movement? I have no idea. It's a question I'd be delighted to take up with a thoughtful writer like Michael Pollan. With you? Not so much.

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Etc.

Naturescene -- sorry for the confusion. I'm very familiar with the CDM and various types of additionality tests. I guess my confusion was really more semantic, and not very interesting.

Like Capster, I think I'm going to have to punt on most of the other stuff. I'm not fully following the argument, and this is a difficult way to discuss it. For example, it seems pretty self-evident to me why projects should be new to merit offset revenue. How would making payments to a wind farm built in the 1970s bring about GHG reductions? Would you really want a polluting entity to fulfill its obligations under a cap by making payments to such a project? Likewise, I can think of a variety of projects for which financial additionality tests are the key qualifier. For example, there's no reason to flare methane from coal beds other than offset revenue. A simple cost analysis establishes financial additionality. But maybe it's time to leave off on this topic...

Sean -- you're asking a good question. Here's one relatively short explication of a set of generalizable rules (with hand flowchart!). As you'll no doubt notice, though, there is still a degree of subjectivity in making these determinations. As with any exercise in infrastructure planning, someone still has to look at each box in the flowchart and decide whether the answer is yes or no. So your mileage may vary. I think we might simply disagree on how big a problem this is.

One other thing you'll note in the doc is that there is some hope for skeptics of financial additionality. Even if a project is financially attractive, the CDM process makes allowances for projects that simply aren't happening in actual practice. I don't particularly think this will help you (it's more for developing countries), but there is recognition of the fact that some good projects simply don't go forward, regardless of what the spreadsheet says.

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Sounds fine, but...

...this still has nothing to do with additionality. Additionality is an issue for offsets, not for allowances. You write:

Additionality? No need -- just good guys and bad guys, selling or buying GHG emissions.

This sentiment applies exactly as well to energy producers under a cap. You might not like a cap for a variety of other reasons, but additionality remains a red herring.

Otherwise, sign me up. I'm yet convinced that such a system would be simpler than any other system under consideration -- there's a lot of blue sky between a blog post and bill before congress -- but I can see the merits.

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Couple of questions

Good post, Sean. I'm curious: do you see any features of policy proposals currently under consideration that would prevent the evolution of a derivatives market? Put another way, do you think legislation needs to explicitly encourage the development of a strip market, or does it mostly need to get out of the way? It seems that the carbon markets are developing in a much more rapid and open way than the electricity market (Merrill Lynch already has tracking funds on carbon), so maybe this will take care of itself?

Related question: do you have an opinion on banking and borrowing? Not really the same as strips, but helps to smooth the peaks and valleys of prices. How about carbon price floors?

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Interesting

But I think a better idea would be to genetically engineer warm-weather polar bears that can live comfortably in exurban Atlanta. Monsanto is actively investigating this possibility.

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Partially agree

Sean -- I think you'll see from upcoming posts that I don't actually disagree with the substance of some of your criticisms. The issue with offsets favoring marginal investments is a known one. It's real, and it's probably not going away. Where I think we disagree is probably on two things: 1) how big a deal this issue actually is; and 2) whether it's possible to create a functioning offset market without a notion of additionality. Basically, I don't think offsets are viable financing mechanism for your projects in the medium-term.

Some specific responses:

1. This whole issue sort of goes away when a carbon cap is in place. Assuming the cap encompasses all electricity generation, then low-carbon sources of energy will automatically be privileged in the marketplace by carbon pricing. Moreover, if we want to specifically goose renewables over and above the pricing advantage conferred by a cap, the appropriate way to do so is through an allowance set-aside. The allocation formula for set-asides is an esoteric policy arena, but I suspect it's one that you will be getting to know in the near future. Specifically, I'm guessing you'll be most interested in an output-based allocation mechanism. Such a system would apportion allowance revenue based purely on output -- additionality tests wouldn't enter the picture at all.

2. You raise a good point about the perverse incentives of specific IRR cutoffs for renewables. Again, though, I think this goes away under a cap. The allowance market will be so much larger than the offset market that there will be quite strong incentives to reduce the cost of renewables.

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Responses

spaceshaper -- Of course carbon reductions are subject to measurable scientific parameters. Are you familiar with how standards such as the CDM, VCS, Gold Standard, etc. work?

Sean -- the answer to your hypotheticals really aren't "it depends". There are different ways to measure additionality, with the stringency being determined by the standard being applied. Some standards -- such as the ones for RECs -- rely on simple qualification criteria that apply to broad classes of projects. Others look at project-specific details that include financial metrics such as IRR. In no case that I can think of would developer-specific issues (such as the company's financial health) play a part in an additionality test.

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Incentives, etc.

Russ -- this is true, and in a future post I'll touch on when it makes sense to try to apply additionality screens and when it doesn't. The reality is that additionality screens are rarely applied to incentives for individuals, in part because it is impractical to do so, and in part because the fairness issue you note (whether real or perceived) would make such measures unpopular.

BigTom -- not really. If a project makes financial sense on it's own, its probably not ever going to be eligible for offset revenue. And if it doesn't make sense on its own, there's no perverse incentive. Further, you can generally claim offset revenue in the future if you can credibly demonstrate that anticipation of such revenue played a part in the decision to go ahead with the project. So there really isn't that much of a timing issue. Finally, real world experience suggests that this scenario just isn't all that common or plausible. There was no mad stampede to cut CO2 emissions prior to the creation of a carbon market, and it's really hard to see that providing an additional financial incentive is going to do anything other than accelerate such projects.

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To be fair, though...

Krupp doesn't say that cap-and-trade will be enough. Page 214:

A cap-and-trade system will help, since it will increase still further the value of energy savings. But in trying to affect the decisions of millions of individual consumers, a thicket of other obstacles may need to be pruned away, through policies that complement cap and trade.

It goes on from there, talking about principal-agent problems, knowledge asymmetries, etc.

The book doesn't talk very much about energy efficiency, etc., but that's mostly because the book isn't really about those things. I think these lacunae will draw some criticism, but overall the book seems to me to make its central argument quite well.

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I'm mostly inclined to agree, but...

...I couldn't help seeing unintentional irony in this bit of spin from Lutz:

My thoughts on what has or hasn't been the cause of climate change have nothing to do with the decisions I make to advance the cause of General Motors.

Hasn't that kind of the been the problem these past few decades?

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From the article

"If you see [a giant Burmese python], don't attempt to engage it."

Service journalism at its best. Now we just need a Google Maps mash-up showing us python density in our  neighborhoods in 2100.

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I drink it up!

If you leave five minutes before the end of There Will Be Blood, you'll miss the best lines of the movie. I've been irritating people for days now by quoting that final scene.

I guess you could call No Country For Old Men downbeat. If it doesn't win Best Picture, though, well...that will merely confirm everything that we already know to be true about the Academy Awards.

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Good intentions, questionable policy

I'm glad you made the point about majoritarian politics. Really the essential benefit of cap-and-dividend programs, as I see it, is their ability to invest a large portion of population in solutions to climate change. Turning cap-and-dividend into a social welfare program not only removes this benefit, it actively undermines it by dragging in the freighted politics of income redistribution.

Everyone is eyeing the pot of money from auctioned allowances. I personally find some potential recipients (e.g., the poor) to be a lot more sympathetic than others (e.g., energy companies), but I see a lot of wisdom in skipping the whole debate and just giving the bulk of it back to the consumers who are actually bearing the cost.

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Er, yeah

It is true that people who own coal mines will have to sacrifice quite a bit of their future income. On the other hand, we'll see the rise of the solar and wind barons.

And as long as we're being honest here, I can say that I honestly don't care if owners of coal seams don't make out all that well in 2050.

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By the way

The other issue with the Times editorial that I wanted to flag is that calling climate change an overriding "environmental issue" seems to be sort of missing the point. Climate change wraps a whole lot of issues together, and if I were going to slap a single label on the package, I'd probably call it an economic issue. But word limits, etc.

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Indeed

Similar rules apply to eBay and wedding proposals.

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Re: Cryptic subhead

Sorry, I posted this at 2AM, and the subhead is way to cryptic for it's own good. It was meant to be a play on the whole 80% by 2050 thing, because Frito-Lay is hitting roughly 80% by 2010. Wasn't meant to be negative at all.

I'll see if I can edit, but Grist's editing software is...unique, like a beautiful snowflake.

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Expertise

Back a long time ago when I was a computer programmer, people often had this mistaken notion that I could fix their computers. And sometimes I could -- because there was nothing really wrong with their computers, and because I had a general facility with them, and because I knew how to use Google. But nothing about being able to program web sites in Java made me an expert in fixing laptops.

Where I'm going with this is...there's no reason for Dan to be an expert in monocrop biofuels, or to ace a quiz on which countries emit the most greenhouse gases. In fact, he may know a lot about those things, because he's a smart guy who works in a climate-change related industry. But pop quizzes aren't going to be a good use of his time.

The things Dan is likely to know about are stuff like carbon project finance, carbon project methodology and quality standards, corporate energy efficiency, etc. I'm looking forward to the interview.

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Re: confusing or confused

Michael, you write:

Many environmentalists have long seen any suggestion that technology might be the answer to environmental problems as hostile because they have long seen technology, and economic development along with it, as the problem and cause of environmental problems.

The thing is, I'm not that environmentalist. I believe that clean tech is the only long-term solution to climate change. I believe that an excessive focus on personal sacrifice as a solution to climate change is misguided and counterproductive. I believe that economic development is a moral imperative. I believe that climate change, if addressed appropriately, is a potential opportunity to transform our economy into something truly sustainable -- an opportunity that could make the world both healthier and wealthier.

So, to a large degree, it feels like you're shadowboxing with an imagined adversary. Yes, I know there probably are a bunch of environmentalists out there who are genuinely anti-development. But probably less than you suppose, and anyway they aren't the ones you should be targeting your message toward.

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Couple of comments

Hi all,

Interesting discussion. A few comments:

Since tree planting is the sine qua non of carbon offset programs...

This isn't true in theory or in practice. Tree-planting projects are a very small percentage of offsetting projects worldwide. They're just what most people seem to have heard of.

That is why carbon offsets are a stupid idea. They can do nothing in the face of continued emissions. We could quibble about my math but even the thought of burning 140 lbs. of dry plant matter daily just to bury and level your carbon emissions is insane. We have to stop burning fossil fuels. There is NO ALTERNATIVE.

This is confused, to say the least. Carbon offsets are a funding mechanism for whatever means of carbon reductions you prefer, including alternatives to fossil fuel use. Far from being a "stupid idea", they are an enabling mechanism for the types of changes you would like to see take place -- changes that won't otherwise occur.

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More complicated then you might think

It's 2AM on Saturday, so I'm not going to say much about this right now, but there's actually a fair bit of contention over the appropriate way to make carbon claims from RECs. Commenters are right that this is an interesting topic worthy of a blog post. However, It's not as simple as saying that RECs are a more mature market and therefore a safer bet.

And for the record, one third of TerraPass' carbon portfolio consists of Green-e certified RECs.

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Not actually my point at all

I'm not particularly defending this offset project, about which I know very little. I also know that Gar knows very little about it, because I've seen this game played so many times before: pick a convenient anecdote plucked from some skimmed press account and use it to smear offsets in the most absurd way possible. When the comparison is shown to be silly, move onto the next anecdote.

It strikes me as a bit shameful to put words in the mouths of Indian farmers in the service of your pet issue, but, hey, if it allows you to compare offsets to kidney farming, what's the harm? "What about the children?" style arguments are Gar's stock in trade. Remember when offsets were responsible for Apartheid-era  environmental injustices? How about when offsets were responsible for
destroying the Galapagos? Or when offsets were beating and shooting Ugandans? Those were good times...

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Another note from TerraPass

I'm chiming in way too late on this (been on vacation the past few days), but a few comments:

Regarding survey design: this is not, as some have pointed out, an independent study. Conducting independent surveys is expensive, and though we probably will commissions independent research at some point, it wasn't in the cards right now. However, the sample size of several thousand respondents is easily enough to achieve statistical significance. There is a possibility of sample bias -- perhaps only the greenest customers elected to respond -- although I can't think of any particular reason to assume this would be the case. Survey question design is obviously crucial to getting meaningful results, but please note that we did not, as some have suggested, ask people why they buy carbon offsets. It would be hopeless trying to get a good answer to this question. Rather, we asked people about other concrete behaviors that they engage in, which is far easier to survey.

Regarding the fact that this survey was conducted by an interested party: well, yeah, so of course you'd be wise to exercise judgment in interpretation of the results. I can assure you, though, that we have accurately presented the results and that we have never conducted any other surveys that yielded discomfirmatory results. It is the case that some of the behaviors we asked our customers about yielded less dramatic comparisons than the ones we presented, but none of the results presented our customers as less green than average.

Regarding the lack of a control sample: The national averages seem to me to do the trick. Of course TerraPass customers skew towards regions that have higher green awareness, but how could it be otherwise, given these results? It would be really weird (although certainly interesting) if our customer base skewed really green and also exactly matched the population distribution of the rest of America.

Regarding "little green lies": I'm sure there's some element of this in the survey responses, although not nearly enough to entirely account for the results. Most of the questions we asked would constitute fairly big green lies. Might someone stretch the truth about biking to work? Possibly. About having solar panels on one's house? That would be a bit pathological.

Concluding thought: this survey is not the last word on the subject, but it presently represents some of the only real data in what has otherwise become a religious discussion.

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Tapping the chub

There is a study out there that looks at the possible fuel savings of tapping into the energy reserves embodied in American flab. Sadly, I can't find it with quick Googling, although I first came across it when writing about the bicycling paradox. The idea, basically, is that by turning fat into bicycle miles, we can directly supplant car usage.

Anyhoo. Isn't the idea with crowd farming not so much that Americans are tubby, but that walking is an inefficient way of getting around? A lot of energy is dissipated straight into the ground during walking, which is basically a repeated motion of falling and catching ourselves. Presumably this idea would capture some of that wasted energy.

What I need is a laptop that is powered by the energy dissipated when I pound on its keys...

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Is this post totally wrong?

I can't access the original report, so I'm conjecturing a bit here...but has anyone else noticed that the premise of this post seems to be totally false?

There's this thing called "double counting" of offsets, which is what happens if one offset is counted twice against a mandatory cap. Double counting is bad, although it also seems to be mostly or entirely theoretical.

Double counting, however, is not the same thing as a single offset being sold more than once. Person A can buy an offset and then sell it to person B. Person B can sell it to person C. And so on. The offset can be traded as many times as people want. The important thing is that the offset can only be counted once against a mandatory cap -- once person A sells it, he can no longer claim the reduction --  but there's nothing fishy about selling an offset again and again.

What appears to be happening in this case is that an offset is only being counted once against a mandatory cap. So this is above board. At the same time, some companies who are trading the offsets are making bogus claims about their own voluntary corporate greenhouse gas reduction programs.

Is this sleazy marketing? It sure sounds that way. Does it say anything about the integrity of the carbon markets? No. Companies make inflated or just plain false claims about their environmental initiatives all the time. Usually we take these falsehoods to reflect poorly on the companies, not on the environmental initiatives.

If I'm reading this correctly, the entire premise of this post is false. I'm not holding my breath for a retraction.

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Allow me to muddy things further

Hi naturescene,

Maybe I can help. You're actually mixing together two slightly different concepts, and perhaps teasing them apart will simplify the discussion. (Alternatively, maybe it will make it twice as confusing.)

The first concept is that of additionality. This is essentially the notion of whether the project would have happened in the absence of offsets. Additionality is important, because otherwise the offset is essentially worthless. Without additionality, you're paying for something that would have happened anyway.

The way that additionality is typically determined is by applying a series of tests (called, oddly enough, "additionality tests") to a project. The tests differ depending on project type, but the simplest to understand is the financial additionality test. That is, if an offsetting project isn't financially viable in the absence of offsets, then it is most likely additional. Financial additionality can be easy to establish (e.g., landfill methane digesters) or relatively harder to establish (wind farms that get tax breaks and also sell electricity). Needless to say, there is a lot of complexity around this topic, but that's the basic idea.

The second concept is that of an emissions baseline. Even once you establish additionality, you also have to establish what level of emissions would have occurred in the absence of the project. Even if you don't care about additionality (which you should), you still need to know what the baseline is, because this determines the number of offsets generated by the project.

Like additionality, the means of measuring the baseline is project dependent. Usually it's pretty easy. If you cap a landfill, all the methane is captured and can be directly measured by sensors before being destroyed. Sometimes establishing a baseline is hard. One of the big raps on tree-planting projects is that it's very difficult to determine how much CO2 trees actually absorb, particularly given all sorts of complicated secondary effects.

Not sure if this helps, but that's the basic idea.

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Couple of comments

Interesting discussion. Couple of comments:

• I generally agree with David's take that the marketing has been a problem, but I'd also like to point out the responsible marketers are as usual somewhat ahead of the curve here. At TerraPass, we pretty much never use the term "carbon neutral." The concept is just a bit silly. Buy offsets if you want to support greenhouse gas reductions. Neutrality doesn't enter into the picture.
  
• Eriga, the very concept of an offset is most certainly not a marketing invention. It's an environmental policy invention. Consumers tend to focus on the voluntary market, but the term offset was coined in the regulatory market. It's an ugly, unfortunate word, but it's definitely not a marketing invention.
  
• JMG, you say that "the companies marketing the things never promise to track your particular dollars and show you how they are spent." In the case of TerraPass, this is untrue. Your purchase comes with a product content label showing where the money goes, and every single transaction we make is listed on our web site. I believe we are unique in this regard.
  
• JMG, you also claim that there is no way to police marketing claims. In fact, TerraPass is independently audited by the Center for Resource Solutions to validate our marketing claims. Again, I believe we are unique in this regard.
  
• JMG (again), you seem to think that the overhead question is somehow different between non-profit and for-profit marketers. It is not. Both are equally transparent on this issue (which is to say, not very), and the notion that for-profit companies are the same as non-profit with an additional markup for profit is just a basic misunderstanding about how corporations work.

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By the way

BioD and I posted on similar topics at nearly the same time. Apologies for any redundancy. I'm sure readers would be glad never to hear the word "offset" again.

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Coming out of the closet

It would be odd if someone went into the voluntary offset business without favoring a cap-and-trade system.

I have something to confess. I am a retailer of carbon offsets and...I favor a carbon tax.

I don't really know how it all started. Originally I went into this line of work because I wanted to give SUV owners a way to feel better about themselves. It saddened me that so many drivers out there weren't able to really enjoy the off-roading capabilities of their vehicles, because they were so burdened with guilt over global warming.

Sure, the greenhouse gas reductions, investment in renewables, and policy activism were nice perqs of the job, but all that enviro stuff was pretty much gravy. My true passion was for carbon offsets as an end in themselves.

Then something odd happened. I actually began to evaluate environmental policy proposals on their merits. It didn't happen overnight. Frankly, some of those carbon tax people scared me, with their shrill, over-the-top denunciations of cap and trade legislation. Given that cap and trade and carbon tax proposals are more similar than different, and given that they share the same goals, why the need to distort, exaggerate, and mock? I also knew that Exxon Mobil favors a carbon tax. Could it be that that the taxers had a secret agenda?

But then I read somewhere that a bunch of economists -- really smart people with degrees and everything! -- think a carbon tax will be more efficient.

So here I am today. Really I just want the U.S. to pass some form of well-designed legislation that puts a price on carbon, whether a tax or a cap and trade system, as soon as possible. But if I were calling the shots -- which, as a viral marketer of offsets, I pretty much am -- I would go with a carbon tax.

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Oy gevalt

Good grief. I really am signing off after this, but I don't think I can live with the burden of knowing that I consigned us all to death, so one last crack at this.

When I say that "renewable energy is more important than preserving old growth forests," please understand that this was in response to a question about the best uses of carbon offsets, not a normative statement about what matters in life. You posed the question, so I hope this is clear.

Further, understand that unabated global warming potentially has a range of consequences that includes the destruction of forests, plus the destruction of numerous other ecosystems, plus mass extinction, plus lots of human suffering. So I am unapologetically focused on the higher order goal of seeking the most effective solutions to climate change -- although, for the record, there is absolutely no reason we can't focus on forest preservation and renewables simultaneously.

If you ask me -- which you did -- about the best way to address climate change, my opinion is that it through investment in renewables. Climate change is in some respects a math problem. We put so many gigatons of CO2 in the air every year, and we need to get that number down to a certain level as quickly as we can. Given the demographic trends in the developing world, it is going to be impossible to achieve those reductions without massive investment in renewable energy.

However -- and this is important -- no one strategy is going to get us all the way there. The concept of stabilization wedges is the most useful way to conceptualize the problem. We need renewables. We need efficiency measures. We need conservation and behavioral change. We need forests. Not all of these wedges will be equally important, but neither will any of them alone suffice.

This is not greenwashing or an Exxon-inspired conspiracy. One of the messages that we try to promote at TerraPass is that activity on many fronts is required to address this problem. The green community has done a great job whipping up passion over this issue. What is also needed is a nuts and bolts focus on what it will take to truly get us to the promised land.

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Coal vs. forests

The covers become a little loosened, and the anthropocentric shallowness of the motive is revealed, as well as a lack of understanding of the broader world, of which humans are only a small part.

Sorry, David, but no. Building a bunch of new coal plants is bad for the broader world. There's nothing anthropocentric or shallow about this recognizing this. Unabated global warming is expected to lead to, among other things, mass extinction. I understand that you might prioritize other environmental issues more highly, which I can respect, but don't presume that this speaks to the purity of anyone's motives or understanding.

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Top ten

Wiscidea -- it's an interesting question, mostly as a demonstration of why the seemingly simplest questions can be the trickiest to answer. But the premise is a little questionable. One of the supposed virtues of a market for carbon offsets is that no one is picking winners in this explicit fashion. I say "supposed" because the market is still too young and fragmented to working in this ideal fashion.

In terms of some broad guidelines, I would suggest the following:

• Supporting renewable energy is way more important than protecting old-growth forests. Every coal plant that gets built is going to be with us for a long time. The best long-term dividends come from hastening the transition to low-carbon sources of energy.


• In terms of additionality, methane abatement projects are generally considered quite solid. These include landfill methane abatement, dairy farm methane, and others. There are some nuances here, but I'm mentioning it because these projects are probably off the radar screen for most people.


• Project type isn't really as important as project quality, which can vary dramatically even within project categories. This will become easier for consumers to sort out as standards emerge, but right now I don't have a 100-word rule of thumb.

Sorry not to have a better answer. It's a complex topic, not amenable to a top ten list.

www.terrapass.com/blog

Rarity redux

Hi James,

I regret to say that you're confusing two very different numbers. The Marrakech Accords state that Annex I countries are allowed to offset no more than 1% of their emissions using forestry projects. That's an entirely different thing than saying that only 1% of CDM credits can be from forestry.

1% of total emissions from Annex I countries is equivalent to about 100 megatons (I think -- I'm doing the math quickly). So that's the cap on forestry credits.

Of that 100 megaton cap, here's how many forestry credits have been issued to date: zero. None of the six registered projects have issued any credits so far.

Here's how many forestry credits are expected to be issued by 2012, the end of period to which the Marrakech Accords apply: 3.9 megatons, or approximately 4% of the allowed total.

So the Kyoto signatories set a tight cap on forestry offsets, and then managed to only come up with projects totaling 4% of the cap. Kinda rare, I'd say, but that's just my uninformed opinion.

Let's peel back the onion a bit further. Why do you suppose forestry offsets were capped at 1%? Because the UN hates trees? Or because of a variety of concerns related to the ones I outlined in my post?

P.S. The folks at Pacific Forest Trust read Grist too. I talked to them just a little earlier today. They seemed pretty happy with what I wrote.

www.terrapass.com/blog

Distractions

David beat me to the punch on this, but the "distraction" argument is if anything more bogus than the indulgence argument.

But, in fact, it makes it things worse, because it delays the needed response --- stopping the inrush of water.  Once you have taken on enough water you sink anyway, and you regret not having put your priorities in order the minute you understood that you were taking on water.

Seriously, what does this even mean? Setting aside pointless analogies about water and sinking and whatever, is there anybody who credibly believes that the thing holding us back from the needed response to climate change is the carbon offset market? How can any reasonable observer of politics, economics, or culture suggest that offsets are the reason that we haven't adequately addressed climate change?

And stepping back a bit: given that offsets are a general funding mechanism for renewable energy and efficiency projects, why exactly can't they be part of the "needed response"? Is wind energy part of the needed response? Improved public transport? More energy efficient buildings? Well, all of these things cost money. Offsets provide money. Explain the distraction thing to me again, please.

I know that some people feel that the only legitimate route to addressing climate change is simply using less energy. But we can't conserve our way out of this problem. We need to switch to carbon-free energy sources, in addition to pursuing efficiency and conservation measures. People who think we're going to conserve our way out of global warming are either uninformed or unserious about the task we face.

www.terrapass.com/blog

Heh

Man, are you going to get it for this post. But, yeah, you're right, the indulgence thing just never made any sense. I can certainly understand why people make this accusation, but I'm a little surprised that no one ever gets called on the basic logical error.

Another one of my favorites: any given article about offsets will prominently mention the "potential for fraud," as though this somehow distinguishes offsets from...anything else in the world. Usually journalists will put this accusation in the mouth of some random commentator, but often it's taken as so axiomatic that the reporter will include it unattributed.

I've been struggling to think of other industries that so often get smeared with the "potential for fraud" line despite having no actual demonstrated instances of fraud. (And, to be clear, the fraud line is not a reference to quality issues. It's a reference to out-and-out fraud.) There's probably a decent analogy with the way the organic food industry was treated by reporters in the early '90s, but my memory isn't that good.

www.terrapass.com/blog

Rant?

Um...no, neither I nor Joe acknowledge that trees make the highest quality offsets in the world. I think we both just spilled a lot of words saying the exact opposite. Nor does the UN think trees are great. Almost no tree-planting projects have made it through the CDM certification process. The reason for this is because tree-planting projects are problematic. Nor, unfortunately, is the CDM above reproach. In fact, the CDM is going through a fairly wrenching period of scrutiny right now. I doubt the august carbon experts at BusinessWeek would have very many positive things to say about the CDM.

Nor is my issue that tree-planting projects are rare. In fact, I was holding their relative rareness out as a saving grace. My issue is the other six substantive problems that I laid out.

The purpose and value of my, er, rant is to help people who are interested in offsets to identify high-quality ones that actually reduce greenhouse gas emissions.

www.terrapass.com/blog

One more guide

I forgot to include a mention of Coop America's guide to carbon offsetting, which is also quite good.On Carbon offsets are tricky business posted 2 years, 4 months ago 17 Responses

Well, I care about carbon emissions

I think this is probably clear from the post, but just to state the obvious: deforestation is an important issue for reasons beyond just climate change. As I said above, it would be really good to solve the problems with trees as a source of offsets so that we can open up another revenue stream for preserving forests.

And of course, people can always choose to support tree-planting projects for reasons other than carbon sequestration -- although the issues of permanence and quality will be no less important.On Trees are good for a lot of things; carbon offsetting isn't one of them posted 2 years, 4 months ago 27 Responses

Greenhouse gases

Wiscidea,

I think the most technically accurate way to put this is that the burning of fossil fuel is responsible for the majority of anthropogenic global warming. There would be a lot of greenhouse gases in the atmosphere regardless -- particularly water vapor. The problem is that atmospheric concentrations of CO2 are rising quite rapidly, and that rise is primarily due to energy consumption and industrialization. Deforestation is another important source of CO2, causing about 20% of anthropogenic global warming, and agricultural methane is also a big issue.

In answer to your second, semi-serious question: unfortunately, no. Your plantation is too small to attract interest, and it wouldn't pass any sort of additionality test.

- AdamOn Carbon offsets are tricky business posted 2 years, 4 months ago 17 Responses

Green power = carbon offsets

Hi Joe,

As you know, I'm posting some further thoughts on this topic, but one thing that's just screaming out to be addressed now: the green power purchases you like so much are exactly the same thing as carbon offset programs. They work the same way, the have the same issues, etc., etc. For example, additionality is just as big an issue for RECs as it is for offsets. And a huge portion of the offsets generated under the CDM come from wind.

There are technical differences between RECs and offsets -- for starters, RECs are denominated in megawatt-hours and offsets are denominated in metric tons -- but the technical differences don't mean that much at the level that you're analyzing these programs.

So purchasing green power, while a good thing, is not the same as "cleaning up your own house." Purchasing green power does not, for example, give you license to waste as much electricity as you want guilt-free, any more than offsets give you license to buy a fleet of Hummers.

- AdamOn Breaking all the offset rules posted 2 years, 4 months ago 16 Responses

I'll be interested...

...to see where this is headed. There are a lot of useful guidelines that people should follow when evaluating offsets and offset vendors, and I'm always happy to see efforts made to spread awareness about offset quality.

I do note, though, that proponents of quality criteria sometimes have an unfortunate tendency to frame their advice against a misleading strawman portrayal of offsets. I see a bit of that tendency creeping into the post above.

From the outset, the post is framed as a "fight against those overhyping offsets." Exhibit A is Google, a company that thinks it can go green by "burning coal and then buying offsets."

Does Google really think this? Not according to their own web site, where they place their offset purchase in the context of a multipronged approach to greenhouse gas abatement in which they stress renewable energy and efficiency. Historically, Google has actually been fairly leery of offsets, favoring instead direct investment in renewables, investment in basic R&D, and aggressive pursuit of efficiency. Google seems to have come to offsets only reluctantly -- in their words, as a temporary solution -- because offsets are the only tool available that will allow them to balance all of their emissions immediately. What's being overhyped?

Likewise, the notion that the author is offering "rules of the road" where none now exist is more than a bit of an exaggeration. Multiple industry-wide quality standards have been under development for a long time now. Several credible independent studies of the voluntary offset industry are in circulation. Is the work done? Not by a long shot. But there is tons of exciting activity in this area, and it deserves to be acknowledged.

Point being, there is room for lots of voices in this conversation, and I certainly welcome the addition of Romm's. But hopefully laying out the rules of the road won't mean steamrollering all nuance.On Taking 'em to the mat posted 2 years, 4 months ago 7 Responses

Happy to be archi-centric

atreyger --

The linked article claims that energy use in buildings accounts for a third of greenhouse gas emissions. I don't actually know what percentage of worldwide emissions are from iron kilns, but saying that the energy efficiency of buildings is much more important is probably actually an understatement.

Gar --

Cap and trade is not a necessary feature of an offset system. When you have a financial instrument representing an emissions reduction, that by common agreement is called an offset.

I'm pretty sure you're aware of this, because you routinely use the term "offset" in reference to the voluntary market, which does not in fact allow anyone to "burn more carbon."On New financial instruments may one day plug cities' building codes into global carbon market posted 2 years, 6 months ago 13 Responses

In response to Gar

1. First off, I'm not of the impression that oceanographers think that this single experiment will result in a significant nutrient drain or methane emissions. As I've said, I'm not a fan of this experiment. But intellectual honesty compels me to admit that it's probably not consequential. The ocean is really, really big. Iron is a natural, non-toxic substance. It is flatly false to suggest that this experiment is a "signficant risk to our oceans." Let's be serious about this. This exact same thing has been done many times before.
   
2. There's some delightful irony in your suggestion that the voluntary market is scandal-plagued. Of course, it is not. But you wouldn't know that from reading your posts. It is fair to say that the voluntary market is critic-plagued.
   
3. I'll make a follow-on prediction. Even if this scenario comes to pass, it will be immaterial. Planktos can claim whatever they want, but they won't gain access to the regulated market. They will sell very few offsets, and in the meantime, a worldwide carbon market will continue to channel billions of dollars into renewable energy projects, much as it is doing now. Nevertheless, you will attempt to convince Grist readers that iron fertilization and Ugandan tree-planing projects are what undergird the global carbon market.

Nothing to see here

Hi Dr. X,

Your suspicions are misplaced. Couple of things:

1. We didn't donate the offsets. The Academy purchased them.

2. As a not-yet-profitable start-up, I don't think we have any taxes to write off.

3. We agree that celebrities should be putting their wealth into energy efficiency. See the conservation handbook we put together for inclusion with the gift. (This was an out-of-pocket expense for us, but the way. No one was begging us to write the handbook.)

Perverse incentives

The story about ESKOM raises an interesting point. It is true that the motivations of the utility have nothing to do with the additionality claims being made on behalf of the CFL project. But let's take a look at what actually happened here:

1. A well-meaning NGO sold offsets in order to finance the distribution of energy-efficient lightbulbs in South Africa. Poor communities got better lighting, and greenhouse gas emissions were reduced.

2. A non-well-meaning utility distributed energy-efficient lightbulbs in South Africa. Poor communities got better lighting, and greenhouse gas emissions were reduced.

Now, I'll be the last person to argue that additionality doesn't matter if the projects have a feel-good aspect. Additionality does matter, particularly if countries are using the offsets to meet their caps.

But I must say that it does cause a certain amount of dissonance when I see offset critics gloating over this sort of "failed" offset project. I tend to see potential in such stories, rather than disaster.On The debate that has all the kids talking! posted 2 years, 9 months ago 18 Responses

No dead horse left unbeaten

Sigh. This is really just about the least interesting debate in the world, but I feel oddly compelled to bring some balance to the perennially unbalanced offset commentary on these pages.

So just to throw a few alternate viewpoints out there:

1. Tree planting is almost wholly irrelevant to the topic of offsets. Only the popular press, Coldplay fans, and certain bloggers think that this is a major issue. Gar has demoted tree planting projects from "the enemy of mankind" to "not the largest type of offset," which is still wildly misleading.

2. Measuring the CO2 reductions from reductions is generally not that hard.

3. The reason we want to attach an amount of CO2 to an offset is that the goal of carbon offsets is to reduce CO2. Generally it is considered a positive to try to measure the outcome of program.  Plus, see #2.

Nature lovers vs. cabin plunkers

Hi all,

Good conversation. I'm sorry that I've been away from the computer all day.

One comment: I think there's a tendency to get carried away with white-hat/black-hat characterizations of those who love nature and those would destroy it for profit. Hence we hear about "money grubbers" and "power hungry leaders", etc.

But when I wrote that in most parts of the world, littering is not particularly seen as uncool, I wasn't actually referring to the self-indulgent and wealthy. I was referring to the average person, and on a global scale, the average person is quite poor.

A sense of environmental ethics and aesthetics is something that grows with wealth, not shrinks. It's a cultural value, not a universal value. That's why I think that both carrots and sticks are necessary. Certainly cultural values can and do change over time (thank god), but the process is slow. So appeals to self-interest definitely have a place.On Environmentalism's confusing accounting posted 2 years, 9 months ago 59 Responses

Er

"Wind could do that 80%, along with plugin hybrids."

If only. It would also be nice if eliminating corporate welfare could be used to finance an energy revolution in the United States, but unfortunately the actual amounts involved in corporate giveaways, annoying though they may be, are fairly insignificant in comparison the energy problem. It's not enough for solutions to be well-meaning. They also have to be up to the task.

"Carbon offsets are actually deffering these real solutions."

Carbon offsets are funding these real solutions. Offsets fund things such as wind farms, methane digesters, conservation, etc.

"By encouraging power companies to keep on using fossil and nuclear power."

Not sure what offsets have to do with either of these things. Power companies don't seem to need any encouragement on either of these fronts.

"They promote quietism on the part of the public.  Buy an offset and don't complain about the status quo energy policy."

I hear people make this accusation all the time, but I never hear them offer any reason why it should be true. Who are these people who are choosing between buying offsets or complaining?On Setting some facts straight about the future of carbon regulation in the U.S. posted 2 years, 9 months ago 17 Responses

More re: Greenwashing

Almost forgot -- the reductions from offsets do not occur "sometime in the future." At TerraPass, we guarantee that offset reductions occur in the same time period as the purchase is made. This is known as "maturity matching," and it is one of the criteria that our independent auditor holds us to.On Setting some facts straight about the future of carbon regulation in the U.S. posted 2 years, 9 months ago 17 Responses

Counterfactuals

Gar, I just reread your post, and it doesn't say anything about wastes being concentrated, or other downstream consequences. But if it had, you're right, I would point out how far-fetched that scenario is.

Have you heard of any plans to merge the Biasar landfill with other landfills? If such a merging were to take place, do you know whether the economics of methane flaring would actually change?  More importantly, do you have reason to think that most or even many or even a few other landfills are in a similar hypothetical position -- because obviously a blanket criticism of the concept of additionality can't rest on a single project.

The answer to all of these questions is "no." The article you linked to contained a crystal-clear explanation of why the Biasar project is additional. Just because it's possible to imagine scenarios in which additionality is violated doesn't make those scenarios plausible. These arguments have to be rooted in the real world.On Setting some facts straight about the future of carbon regulation in the U.S. posted 2 years, 9 months ago 17 Responses

That's the spreadsheet

Yep, that's it. Sorry the URLs got munged, but if you click the links in my comment, they'll take you to the right place.

Bart, just so you know, I'm not actually all that angry. Bemused is probably a better word to describe my current emotional state of being. I do enjoy me a good blog kerfuffle, though.

Happy to answer additional questions...On They're not a silver bullet, but they generally work posted 2 years, 9 months ago 35 Responses

Pricing

Hi sunflower,

I appreciate your comment, but it's not really possible to draw many conclusions from prices on the CCX, which is a voluntary exchange. I think the CCX is a worthwhile experiment, but we need a carbon market that is mandatory and encompasses the entire economy.

Also, a $50/ton surcharge will be politically difficult to achieve in the near-term via any mechanism - carbon markets, carbon taxes, or otherwise - so I'm not sure this criticism is really specific to any one approach.On They're not a silver bullet, but they generally work posted 2 years, 9 months ago 35 Responses

Carbon critics

I was fully expecting the line-by-line dissection, although I notice it's silent on the topic of those trees. In response, I'd like to try to avoid getting excessively caught up in the minutia of Gar's arguments. I suspect we could spend a lot of time shouting about CDM protocols without shedding a lot of light on the topic of carbon markets. Instead I'd like to address some of the broader outlines of his comments.

It seems to me that there are three main strands of criticism, each problematic in its own way:

1. A heavy use of anecdotes that highlight specific implementation problems rather than fundamental issues with carbon markets.


2. Appeals to abstruse economic principles that ostensibly show carbon markets can't work even in principle.


3. Massive rhetorical overreach that ignores the history of debate on these topics.

Taking each in turn:

Anecdotes. Gar doesn't seem overly interested in sticking up for his claims about tree-planting projects, so I won't rehash this debate. It is worth mentioning, though, that these types of criticisms have provided most of the read meat to those who seem reflexively suspicious of carbon markets, so I hope critics aren't losing their nerve on this one.

Economics. Regarding the abstruse economic principles, Gar suggests that I've mistated his argument. I'm going to come clean here and make an admission: I can't respond directly to his economic argument because I don't understand it. To avoid an possible misstatement, here's a version of it in direct quotation:

Project-based credits subvert the entire advantage normally claimed for market means over regulation -- namely, feedback. How do you know a project will reduce emissions? Some bureaucrat evaluates the paperwork and says so. How do you know after the fact that the project has reduced emissions? Another bureaucrat evaluates the claim. At no point does a market provide micro-information, comparable to sales figures telling a store owner she has mispriced an item. Feedback comes through political means, or (as happened recently) through the collapse of the entire carbon market.

I'm sure I'm missing something here, but I just can't parse this. Carbon markets have a supply curve and a demand curve, much like any other other market. Where the curves intersect, you get a carbon price. That carbon price contains useful information about the cost of carbon reductions, which businesses, governments, and project developers can use to make judgments about how to allocate their money for future carbon reductions.

Suggesting that the project-based carbon reductions are a fiction created by "bureaucrats" is a bit like suggesting that corporate profits are a fiction created by accountants. Pollution markets have worked phenomenally well in the past (really, they have), so I see no a priori reason to believe they can't work in principle.

Scams, etc. The third line of criticism is not really criticism at all, so much as outright condemnation:

Carbon offsets are almost always either an honest error or a scam.

The problem is that claims of carbon neutrality based on offsets are almost certainly false.

We've discussed problems with carbon offsets from an economic viewpoint, and from their abuse as a misleading public relations tool. But perhaps we should focus on the awesome cruelty of their human costs.

I know blogs aren't the most nuanced medium in the world, but statements like these can't stand on their own. There are a lot of people out there who seem to hold contrary opinions, so it is incumbent upon the author to actually support these statements. A grab bag of criticisms don't add up to an argument.

Let's look again at additionality. I mention above a category of project called super-regulatory landfill methane flaring, which are generally regarded to be highly additional. Gar responds, "No one every burns landfill methane to produce electricity, or to improve air quality? That would be a big surprise in California even under Reagan."

To answer his question, plenty of people do burn landfill gas for electricity, but that isn't relevant. The relevant question is, "How difficult is it to distinguish additional from non-additional landfill methane projects?" And the answer is: not very difficult. There are two additionality tests that come in quite handy here. The first is the regulatory test. If the flaring happens due to regulatory requirements, it can't be additional. The second is the financial test. If the project couldn't be profitable in the absence of offsets, then it's most likely additional. It's pretty easy to spot non-profitable projects - they're the ones that aren't producing electricity.

Getting back up out of the weeds here, the bigger point is that a lot of thinking has been put into how to address issues such as additionality, carbon pricing, etc. Of course, that doesn't mean the questions have been fully resolved - they haven't - but to read these out-of-hand dismissals of carbon offsets as a scam, you'd think no one had ever thought about these issues before.

191 countries are already signed up for some form of carbon trading. The U.S. is rapidly heading in the same direction. Carbon markets may or may not work. But I'm pretty confident that they're not just some elaborate hoax.On They're not a silver bullet, but they generally work posted 2 years, 9 months ago 35 Responses

Well, it's kind of serious. But not really.

Sunflower, the average American is responsible for roughly 20 tons of CO2 each year. Let's say your baby lives for a 100 years, thanks to its cycling regimen and Lipitor prescription. You'd be on the hook for about 2,000 tons of CO2. Which at present prices is less than one year of tuition at a private college. I'm just saying.

I'd be remiss if I didn't shamelessly self-promote by pointing to TerraPass' tongue-in-cheek follow-up exploring the tradeoff between longevity and greenhouse gas emissions:

http://www.terrapass.com/terrablog/posts/000326.html

I feel dirty.On Love the earth? Die. posted 3 years, 4 months ago 9 Responses

Education is important, but the reductions are rea

David, at TerraPass we do feel the educational mission is perhaps the most important part of what we do, more so even than the carbon reductions. So me mostly agree with you about the educational value of offsets.

But let's not make any mistakes about it: the emissions reductions are real. The product is something we stand behind, and the clean energy projects we fund are having a real impact today.  We wouldn't be in this business otherwise.  

It's also the fact that reductions are real that undercuts the extremely un-clever satire in the Newsweek piece. I hate to be painfully literal about this, but the reason that these indulgence parodies always fall flat is that, to paraphrase Gertrude Stein, a ton of carbon is a ton of carbon is a ton of carbon. Sending a stuffed bunny to a mistreated child laborer doesn't in any way undo the child's pain. Offsetting a ton of carbon, on the other hand, does in a much more literal sense undo a bit of your driving. Many environmentalists don't like this idea, but the environment itself doesn't make such distinctions.

We posted more on this topic on our blog. We appreciate your thoughts on these important issues, so feel free to leave a comment. On Carbon offsets and guilt posted 3 years, 6 months ago 3 Responses