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CoolEffect Sponsored Series

Not All Carbon Credits are Created Equal

How Individuals Move the Needle by Buying on Voluntary Carbon Markets

By Jim Witkin

Global carbon dioxide emissions are projected to reach record highs in 2017 and again in 2018, according to estimates by the Global Carbon Project. This comes after a three-year period where emissions remained flat, which many scientists had hoped signaled a peak in climate warming emissions.

This is very bad news for those who want to reverse this trend and limit the long-term impacts of climate change.

So now what?

We know that government mandated programs - like cap and trade - work to reduce emissions if implemented correctly. In regions with mandatory cap-and-trade programs (so-called compliance markets), the government first sets a “cap” on how much individual companies can emit. Businesses that pollute less than the cap can sell or “trade” their excess allowances (or permits) to those that pollute more. The number of permits declines each year, and companies who fail to meet the cap are penalized.

California, one of the few carbon compliance markets in the U.S., implemented a mandatory cap-and-trade program starting in early 2013 that is working. Industries regulated under California's cap-and-trade program reduced greenhouse gas emissions by nearly 5 percent in 2016, according to recent data released by state officials.

But not every industry is regulated and not every market has compliance rules.

That’s where the voluntary carbon market comes in, by providing corporations and individuals a means to voluntarily fund projects that reduce greenhouse gas emissions through the purchase of carbon “offsets.”

A carbon offset represents one tonne of carbon dioxide equivalent (tCO2e) that hasn’t been emitted into the atmosphere through the development of a project like planting trees that absorb CO2, or a methane capture program, or providing clean-burning cookstoves to rural communities in developing countries. Money paid for offsets is used to finance these types of projects.

The research group Ecosystem Marketplace has been tracking the voluntary carbon markets since 2006. And while market activity has had its ups and downs (in fact, 2016 saw a decline in the purchase of offsets from the previous year), the cumulative volume transacted reached an important milestone in 2016, going over the 1 billion tCO2e mark, as calculated in their latest report.

The report also concluded that voluntary markets have a ripple effect into compliance markets as “incubators” for new project types, and in general have an “outsized impact on emissions reductions activities.”

Companies that are concerned about their environmental impact can use offsets as part of an overall carbon management strategy. Some even use offsets to become completely carbon neutral, meaning the company has no net negative impact on the global warming problem. A typical approach for these companies is to first perform a carbon inventory to measure their emissions, then reduce where they can, and where they can’t, buy offsets.

Some of the companies that are very active on the voluntary markets include Disney, Microsoft, General Motors, Salesforce, Expedia, Enterprise, Google, Bank of America and Delta Air Lines.

But you don’t have to be a multi-billion-dollar corporation to have an impact. Individuals can and should play an important part, especially considering the average American is estimated to emit 17 tonnes of carbon dioxide emissions every year just through daily activities.

Even though the overall volume of sales to individual buyers is small, they are still critical to the voluntary carbon markets, said Kelley Hamrick, a Senior Associate at Ecosystem Marketplace and lead author of this year’s report, “because they tend to focus on value projects rather than volume.” Value projects have feel-good benefits and stories beyond the global warming impact.

Large companies, because of their large carbon footprints, buy in volume so will typically look for the cheapest offsets. For example, renewable energy projects, like wind, or landfill methane capture projects tend to produce a high volume of offsets at a low cost per tonne.

By contrast, “value” projects, as Hamrick described, can still have an impact but are much smaller in scope. Because they can’t reach a large scale or are more complicated to implement, they are more expensive per tonne then larger projects.

Providing clean cookstoves is one such type of value project. The more complicated the project, the higher the cost of each offset. “But if not for the individual buyers, many of these smaller projects would not get off the ground,” admitted Hamrick.

Another appeal of these smaller projects is that many of them provide co-benefits, that is, wider social and economic benefits to the communities involved in the projects. “What we see with individual buyers is they are more interested in ‘where is my money actually going and who is being impacted with this project’,” she said.

For example, clean cookstove projects not only cut carbon emissions but also eliminate toxic fumes in the household, provide local jobs, and reduce deforestation because the clean stoves typically require much less wood for fuel. Switching to cleaner stoves also has an educational aspect involved, said Hamrick, “because you are asking them to change a behavior that’s been part of their culture for a long time, so this is more complicated to implement.”

Regardless of the type of project, Hamrick advised choosing those that are validated by a third-party standard and audited. This ensures the integrity of the project and that the offset will meet its goals. Some of the big names in third party validation are the Verified Carbon Standard, the Gold Standard, and the Climate Action Reserve.  

Not sure where to begin? There’s lots more to learn about the voluntary carbon markets in the Ecosystem Marketplace reports. And numerous online resources, like Cool Effect’s crowdfunding platform, are making it easier than ever for individuals to purchase third-party verified offsets that have a real impact.

Image credit: Flickr / Lily the Person

Jim Witkin headshot

Jim Witkin is a writer based in Silicon Valley and London focused on business, technology and the environment. His work has been featured in the New York Times and Guardian newspapers. He holds an MBA in Sustainable Management from the Presidio Graduate School.

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