My Views on Carbon Offsets [Updated]

Dear reader, as you know TreeHugger is a group effort. We are not a monolithic entity, but rather a diverse group of people from all around the world working together to bring you all kinds of green stories that we found interesting. Over the past two and a half years, we've written quite a bit about carbon offsetting (see Wikipedia article for a primer).

The topic is controversial these days and I'd like to share with you some of my views on offsets. Speaking for myself and not for TreeHugger as a group. More after the jump.The way I see it, offsets are a tool. Not good or bad in itself, it all depends on how you use it.

The chronological order in which things should usually be done goes something like this:

1) Question, Information: Do you know what you are doing, what are the impacts and what are the alternatives (if any)? Have you asked yourself: "Do I really need this?"

2) Reduce, Re-Use, Recycle: When you finally make an informed decision to do something, try to minimize its impact with the three Rs.

3) Mitigate: Then come the offsets. Once you've done your best, offsets can be used to "mop up" what's left until you can find a way to replace what you're doing with something that doesn't have the negative side effects that require the offsets in the first place.

The main problem (I see a few others, but I'll keep them for another post) with offsets is that when you look at them from far enough away, as just part of a system, you can see that they might not be the most efficient use of our resources (cash, human and technological capital) to achieve the objective of reducing ecological damage. The investment that we make in them might not give us, in return, the biggest environmental benefit that we could get from that investment.

But that's the difference between theory and practice. In practice, I understand how they can be the best tool available in certain cases...

In theory, it is much better to invest upstream and fix the problems at their source rather than to try to clean up the symptoms downstream.

For example: If you invest X resources in updating the manufacturing process of laptop computers so that they use less materials and energy, that they contains less toxic heavy metals and that they are made in such a way as to be easy to recycle, you have one big capital investment and then you reap the benefits of that action for as long as you make laptops. As we wrote before, efficiency works forever.

But if you use that same X amount of resources in offsetting the negative impacts of all that energy and material use, and of all those toxic materials, you only offset these impacts for a limited amount of time. As more laptops are built, you have to keep offsetting and that will eventually add up to more than what it would have cost to just fix the upstream in the first place. And if you wait while offsetting and do the fix later, you have to pay the capital cost to upgrade your process plus the costs of offsetting. That's inefficient.

So the most cost-effective way for society as a whole to do things seem to be to fix the upstream as soon as possible.

But in practice...

It is up to governments and corporations to decide to do the capital investments to clean up the upstream. If for some reason they do no see the benefits of cleaning up their act sooner rather than later, the "fix the upstream" option is out of reach for the average person who wants to help and all that's left is downstream measures, offsets being one of them.

That's why it's so important to send a clear signal to governments and corporations: "If you build it, they will come." Clean up your act, and it will be good for your brand and your bottom line. You will be a leader, not late to the party (or become obsolete). It doesn't take a visionary anymore to know in which direction things are moving. Your products will have a true added value, and as the green wave that is currently starting to swell in the mainstream turns into a green tsunami, "clean" will be a serious competitive advantage. And don't try to fake it either: That can only work for so long, and as more and more people become familiar and enthusiastic about "green" concepts, the backlash against the deceivers will become more and more considerable.

TreeHugger wants to make "green" mainstream, because once the public gets it, the politicians and corporations will follow the votes and the money.

But back to offsets:

They are not perfect, but they are 1) Better than nothing, 2) they can still be improved -- it's not because something is imperfect that it should be thrown out -- and 3) their success is a signal of what people want.

Most individuals are not on the board of Dell and can't vote to have them upgrade their processes to clean them up, but if Dell sees that people are ready to go as far as offset the impact of their computers, that means that there's definitely demand for clean computers. Once Dell (used as an example here, but it could be any corporation or government) knows there's a demand, a market for it, they just need to realize that they are in a better position than individuals and offsetters to deliver, and that they could be making that money instead of offsetters. They control the upstream (the "they" also includes governments because they can create frameworks and regulations that encourage clean innovation), so it's their decision, but they do not live in a vacuum, we influence them.

So that's part of my view on offsets. Please share your thoughts in the comments below.

Update: Thinking some more about this, I came up with what I think would be the best offset method with the strongest incentives for people to join and the best benefits to the environment.

The concept is simple: Create a clean energy project (wind farms are the most cost-effective choice for now, but in a few years solar and wave will catch up) and sell shares. Once the capital cost of the infrastructure is paid back, the profits are distributed among shareholders. A bit like WindShare in Toronto, but on a larger scale and not limited to local investors.

That would have a similar impact to some of the current offsetting companies who invest in clean energy, but the incentive to buy would be much bigger and thus more clean energy capacity would be built. The offsetting company would be offering buyers their expertise in planning and managing a project and so would keep a management fee from the profits, but ownership would be spread among more people (I'm sure that owning part of a wind farm would have a certain psychological impact too).

Why do I favor clean energy? Because planting trees or buying carbon credits to retire them form a carbon market (f.ex. the CCX) won't generate profits, so you don't have the shareholder incentive, and because increasing clean energy production capacity is an "offensive" move against global warming and pollution and it helps drive the costs of these clean technologies down while the other two are more "defensive" (though important too).