Zerofootprint: Designing away the problems of offsetting

It is impossible to write anything about offsetting these days without prompting a flurry of responses that point out its problems and pitfalls. Travel offsetting just encourages people to fly more, critics complain. Or energy emissions offsetting does nothing to discourage energy waste, while offsetting book production undermines paper recycling, and so on.

Many of the criticisms are valid, but that doesn't mean we can simply abandon offsetting. If we did, the underlying problems wouldn't simply disappear. And some of the alternative solutions that are proposed are even more idealistic and unworkable — everybody should stop flying, for example. Given the scale of the problem that we face with climate change, and the urgency of the task to tackle it, we can't afford to ignore and what it has to offer.However, we should be clear eyed about the problems, and look for ways in which we might fix them. One approach is to create a framework that acknowledges the dangers, and packages offsetting schemes so that they include mechanisms to negate the dangers. Instead of just looking for a quick fix to assuage our guilt about the environmental damage we are causing, we can develop programs that effectively offset the emissions of generating electricity or producing paper that at the same time include incentives to reduce the underlying cause of the emissions. What is more, if done properly, such schemes can be self-financing.

Many of the difficulties that people raise about offsetting schemes could be classified as 'moral hazards'. Moral hazard is where an action has an unintended and negative outcome — fire insurance encourages certain people to commit arson for instance, or a government guarantee discourages a financial institution from acting prudently.

Offsetting schemes for the carbon emissions of flights or car journeys can have the moral hazard of encouraging people to believe that they can fly or drive as much as they like with environmental impunity. Just how crazy this can get was demonstrated recently when Cootes Transport Group, one of Australia's largest trucking companies, signed up to BP's Global Choice fuel emissions offsetting scheme, and its managing director Vin Stenta concluded: "The more kilometers we travel, the more we help Australia's environment."

Offsetting schemes for company or household energy use can have the same effect. We at Zerofootprint have first hand experience of this because we recently switched to a green electricity supplier, at our Toronto offices. Although we now know that our power now comes only from renewable sources, there is no built-in incentive to reduce our energy use (we pay a fixed fee). We could, if we were so inclined, be as wasteful as we want with a clear conscience that we are not creating emissions. But that would make us a poor role model — there aren't enough renewable resources in Canada for all companies and households to switch to green suppliers for a start - and would ignore all the other emissions that are generated in the process of bringing us our electricity.

Offsetting can never be an excuse for riding roughshod over the basic environmental principles of reduce, recycle, restore. Ideally, offsetting should kick-in after these principles have been explored, if not exhausted, or where applying these principles has its own costs — recycling paper still requires the use of energy and chemicals, for example.

A number of organizations, including large global corporations such HSBC and BP, are now attempting to go 'carbon neutral' - reducing their theoretical carbon emissions to zero. Offsetting is an integral part of most of these projects, but moral hazard applies here as well. In a recent briefing paper by the UK financial firm Standard Life Investments on company schemes to achieve carbon neutrality, it warns investors that such schemes "have the capacity to disguise the failure to achieve actual reductions in overall greenhouse gas emissions," and that, "carbon neutrality without absolute reductions in emissions will not on its own stabilize atmospheric concentrations of CO2 (carbon dioxide)."

Offsetting must be accompanied by incentives to tackle the underlying issues if it is to avoid moral hazard. It should be the condition of buying an offset that the user also commits to conservation and one of the three 'Rs' of sustainability — reduce, recycle or restore. Offsetting the emissions associated with electricity generation should require that the office or household reduce its energy consumption, for example. Zerofootprint currently offers offset schemes that are tied to a requirement for conservation, renewal, recycling and restoration.

And there's an added bonus with this approach. The savings that are generated by the reduction, recycling or restoration can pay for the offsets. Reducing electricity or paper use can pay for offsetting the remaining emissions. This kills two birds with one stone — and the stone is free.

Building in incentives to tackle the underlying problems is an effective way of reducing the moral hazard of offsetting schemes, and it can be done in such as way that it is cheaper for the user. We shouldn't throw offsetting out. That would be throwing the baby out with the bathwater. An offsetting scheme can be an effective way to reduce our global footprint, but it must be designed well.

[Ron Dembo and Clive Davidson, Zerofootprint]

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