What Makes a Quality Carbon Offset

When critics want to show that carbon offset programs don’t work, they’ll often point at Coldplay’s first carbon offset investment. In 2002, the British rock band announced that to offset the environmental impact of their second successful album, a Rush of Blood to the Head, they planned to plant several thousand mango trees in southern India. The announcement was well received: Not only did Coldplay contribute, but fans logged in online to support to the investment. The planting of 10,000 trees was viewed as a worthy investment to balance the many units of carbon produced by the band’s increasingly successful, and carbon-dependant lifestyle.

Four years later, it was revealed that forty percent of the trees had died, allegedly from lack of water. The trees that were to provide carbon sequestration for all those hours of electricity usage, plane rides, performances and retakes were billed as a failed investment.

What critics often don’t relate is the second part to the story: Some years later, Coldplay returned to that initial vision and invested in a forest on the outskirts of an abandoned mine with other investors to transform a World War II armament site into an ecological preserve.

Both Coldplay and Carbon Neutral Company, the carbon offset provider they had contracted through, went on to invest in and manage numerous other offset programs. But, both learned a critical lesson from that initial, embarrassing failure: the necessity of due diligence and the value of adhering to every one of the principles of carbon offsetting.

What makes carbon offsetting work?

It’s easy to get caught up in the nanospeak of carbon offsetting. But the principles are fairly straightforward. Carbon reduction occurs when two parties enter into an exchange that allows the greenhouse gas production of one to be offset or counterbalanced by the environmental benefits of another.

So for example, United Airlines says that it invests in wetland habitat in California, renewable energy programs in Texas and forest conservations in Peru. Those monetary investments into “green” long-lasting infrastructure help counteract CO2 emissions that are produced by United’s global fleet.

But it isn’t enough for United to invest in forests, wetlands and community programs. What makes United’s investments work are what could be called the five pillars of carbon offsetting:

1. The exchange must be quantifiable

A business owner who is considering investing in a GHG reduction program will calculate his business’ carbon emissions first. United Airlines states that it based its calculations on the fuel consumption of its entire fleet and factored in elements that were specific to its business: routes, plane cargo, passenger weight, etc. These specific calculations gave them their carbon footprint, an essential factor in determining their carbon offset goal.

Terrapass, the EPA, and a host of other organizations offer calculators online.

And don’t forget: the certifying agency you contract with (see below for more information) will probably review these numbers with you to ensure your calculations meet the needs of the program.

2. Additionality holds the whole program together

The concept that often seems most nebulous is actually the glue to the entire program: A carbon offset program only has value if you can prove that it wouldn’t have happened without the investment. That wetland preserve for example, wouldn’t have been built without that willing partnership. And that wind farm in Texas wouldn’t have been developed if it hadn’t been for the investment from the power company that wanted to offset its huge greenhouse gas bill.

To determine whether the project will pass the additionality test, you must first know its baseline, which as the Nature Conservancy describes it, is “the carbon emissions or carbon storage that would have occurred without the project.” You can then subtract that information from the carbon emissions of the anticipated project to determine the actual carbon emission savings.

Michael Gillenwater  of Greenhouse Gas Institute points out that one of the benefits of a carbon offset program is it “incentivizes private actors to search for and locate low cost opportunities that policy makers either cannot access or lack information on.” It provides an essential link between two entities that leads to further GHG reduction through voluntary, mutual concessions.

3. There must be no carbon leakage

Say you own a manufacturing business in New York and you decide you want to invest in an ecological preserve in Guatemala that is going to help save a valuable tropical ecosystem. But the establishment of that eco park results in the displacement of a local lumber business that later clears a large swath of jungle in another part of the country for its logging business, instead. The carbon reduction is then nullified by the migration, or "leakage" of carbon emissions.

Investors need to ensure the due diligence to make sure that the partnership isn’t going to (inadvertently or otherwise) lead to displacement or other problems that create more GHG emissions.

4. The offsets must be permanent

Permanence is particularly important when it comes to forestry projects. Will the forest remain standing in perpetuity? Or is the grove at risk of being harvested later? Are there safeguards in place to ensure that wetland preserve will remain as a home for native species, or is it in commercial zoning that will later put it at risk?

GHG emission offset programs rely on the understanding that those investments will lead to the permanence and perpetuity of the project.

There must be third-party oversight and certification

These days there are a variety of independent third-party verification programs. Some consider the Gold Standard to be the ultimate example of third-party verification program. It is used by nongovernmental organizations throughout the world, including World Wildlife Federation International, Canada-based David Suzuki Foundation and Greenpeace International, and is endorsed by the Forest Stewardship Council. It sets a high bar when it comes to additionality, which helps to protect your investments as well as the success of the project.

Carbon offset organizations like Terrapass and UK-based Carbon Neutral Company serve as vendors to help facilitate carbon offset partnerships. Both represent project that have either Gold Standard or Voluntary Carbon Standard rating, ensuring that the programs have passed rigorous scrutiny. Keep in mind as you search explore carbon offset programs and vendors that each vendor is different, and some offer specialized projects that may or may not fit your business’ individual needs.

Image: Yahoo/Vestas Flickr, cc