How much should I spend for my Indulgences: Voluntary Carbon Offset Pricing

So you’ve heard about all the pitfalls in the voluntary carbon offset market, and you still want to buy. How much is the right amount to spend? You might think that bargain shopping is a good idea–that it’s no different than shopping around for the best deal on paper towels. In the carbon offsets industry, cheap offsets are the equivalent of off-brand condoms: they might be fine, but the stakes are so high they are not really worth messing around with.
First things first. There is an enormous variation in the price per ton for carbon offsets. The Katoomba Group’s Ecosystem Marketplace, Voluntary Carbon Markets 2007: Picking Up Steam found an enormous variation in the prices of offsets available for purchase on the voluntary carbon offset market, from 45 cents to 45 dollars per ton! (See the PDF Here)
They included a lovely chart, showcasing the variation in prices by offset project type:

As you can see, pricing is clear as mud. Forestation projects (Aff-mixed) were some of the cheapest and most expensive, as were methane and industrial gas capture projects. Renewable energy projects (RECs) also came in as some of the lowest. If you read my blog on project types, you’ll remember that these three project types are some of the most popular, and they each have varying degrees of precision in the amount of carbon they actually save. The fact that the Katoomba group (I just love writing that!) found some connection between price and quality is actually good news! It represents an improvement in this wild market. An analysis by Kollmuss & Bowell (PDF) two years ago found large differences in price to the consumer per ton of carbon offset, but not a clear connection between price and other variables like quality or type of project.
The pitfalls of the deal that’s too good to be true.
Some of these companies will try to tell you that you can offset a year’s worth of driving for $12 or some cheap lunch low number. Unfortunately, like that free lunch saying goes, there really is no such thing as a quick and easy solution to climate change. An offset that is too cheap probably does not meet the standards of rigor (verifiable, leakage-free, permanent and additional) that we want to see. This means that your money is probably not going towards actually removing the amount of carbon that you’ve been promised.
Does high price mean high quality?
Maybe. The Katoomba study found that the highest prices were paid for projects with strong quality and verifiability attributes, such as landfill methane and coal mine methane, as well the more ‘feel good’ offsets such as forestry projects and long term sustainable development projects, like energy efficiency and off-grid renewable energy. This means that the higher priced offsets might be of higher quality, in terms of either increased accuracy or increased co-benefits, or they might just be more popular like forestry projects. Those forest projects are something to be wary of because the high prices seem to correspond more to their popularity (they are easy to understand and therefore popular to purchase) than their quality.
The final word: price can be a stand in for quality, except when it comes to forestry projects. If you are going to buy offsets, you should go for higher priced offsets that are verified through one of the verification schemes I mentioned last time (the Voluntary Carbon Standard, the Gold Standard, the Climate Action Reserve and/or Green-e), and don’t bargain shop!

Jen Boynton

Jen Boynton is editor in chief of TriplePundit and editorial director at 3BL Media. With over 6 million annual readers, TriplePundit is the leading publication on sustainable business and the Triple Bottom Line. Prior to TriplePundit, Jen received an MBA in Sustainable Management from the Presidio Graduate School. In her work with TriplePundit she's helped clients from SAP to PwC to Fair Trade USA with their sustainability communications messaging. When she's not at work, she volunteers as a CASA -- court appointed special advocate for children in the foster care system. She enjoys losing fights with toddlers and eating toast scraps. She lives with her family in sunny San Diego.

3 responses

  1. Yea, the integrity of the carbon offsets market definitely needs to be improved. Coal power generators love carbon offsetting because it has no effect on them in the least. Its just a band-aid instead of tackling the real issue: We need more renewable power, and faster than any dept. of energy mandate is forcing our electric utilities.
    Renewable Energy Certificates are the way to go, as long as they come from compliance markets where the utility is forced to provide a certain percentage of their power from renewable generators. If they don’t come from compliance markets, that doesn’t force the utility to buy more green power.
    I was surprised to see that is no third party verification (green-e, etc) that distinguishes between compliance markets and non-compliance markets.
    When I looked into REC providers, only one company was actually doing this and making this exact distinction. Village Green Energy from San Francisco ONLY sells compliance market RECs. Its nice to see that someone is adding credibility and integrity to the voluntary carbon offsetting market!!

  2. Well Joseph is a little biased because he’s a recent employee with Village Green! Thanks for the plug Joe. (We’re still teaching him about blog comment etiquette).
    I’m the co-founder of Village Green, so I thought I’d just add my two cents.
    Village Green focuses on Renewable Energy Certificates, not carbon offsets. In the REC world, higher prices definitely cause higher prices. As Joe mentions, the highest quality RECs come from compliance markets. Compliance market REC are more expensive because regulated entities must own/buy them – this creates supply shortage, which leads to price increase over time.
    What Village Green does is enable the voluntary market to interact with the compliance market. When voluntary purchasers buy RECs from compliance markets, they are essentially buying RECs away from utilities. The utilities still need to meet their quotas, so they must find new renewable power.
    They can do this by entering into new power purchase agreements for projects under development, thus giving those projects the necessary financing to be built, or they can build new projects themselves.
    The point is, this all leads to more renewable energy.
    Carbon Offsets address a symptom of our energy problem – carbon dioxide emissions. Renewable Energy Certificates are part of the solution to the problem – generating more power with renewables, and less with polluting sources like fossil fuels.

  3. On these blogs there are so many posts attacking carbon offsetting and renouncing its right to exist. The fact is, as long as the offsets are verified and additional, they add perfectly well to the efforts against climate change. It is true that people should not view them as the whole solution, and it is also true that they are far from perfect in terms of companies actually reducing their own emissions, but, they do reduce overall world emissions. They are better than nothing. While we strive to get governments to set up more renewable energy systems and stricter targets – which may take a long time – offsets allow us a chance to at least do something.

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