Yesterday's Wall Street Journal included an article on the growing business of selling greenhouse gas emission offsets to consumers and businesses. The Journal was generally positive about the practice, while hinting that as it grows, the risks of paying for ineffective or fraudulent emissions reductions will increase. Caveat emptor. What caught my attention was their comment about how these offsets are perceived in some quarters. "Skeptical consumers are also wondering whether the programs are really offsetting their carbon footprints, or whether they're meant to just rid them of guilt." It's a legitimate question, because our experience of more than two decades of dealing with other environmental problems doesn't equip us to dismiss it easily. This perception is also one of the biggest hurdles that the offset firms face.
Climate change creates a number of new challenges for humanity, but it also provides a couple of unique opportunities. Efficient offsets fall into the latter category. Unlike for air pollutants--those nasty smog-forming compounds such as nitrates and unburned hydrocarbons, and the sulfates that cause acid rain--the effect of greenhouse gases (GHGs) is truly global, rather than local. That means that a ton of CO2 emitted in Boston has exactly the same impact on the climate as one emitted in Berlin or Beijing. The corollary is equally true for emissions cuts: any place or source is as good as another. That is the essence of the offset principle and the businesses founded on it.
When this idea is stretched too far, however, it naturally runs afoul of critics. The magnitude of greenhouse gas reductions required to stabilize global GHG emissions at a level that might stave off the worst consequences of climate change is very large, and no emitting sector can get a permanent pass. Viewed this way, the best use of offsets is as a bridge between the cuts we need to start making today, and the intrinsic reductions that will require the complete turnover of vehicle fleets and capital stock. They're also handy for emissions that can never be reduced to zero, such as those from jet aircraft. In other words, offsets provide a bootstrapping mechanism for making indirect cuts in emissions, where the direct cuts can't be done all at once or right away.
Personal cars are a good example of this. I bought a new car in 2004, and I don't expect to replace it until 2011 or 2012. When I was car-shopping, none of the hybrids met my criteria, and the only European-style diesel available was back-ordered, so I purchased a sedan with EPA ratings of 20 mpg city/29 highway. (In practice, this is more like 17/32, for an average of 22.) Since I drive about 6,000 miles a year, I'm responsible for annual CO2 emissions of 5,000 lb. Now, I could trade this car in on one that would cut these emissions by one-third to one-half. Buying a hybrid comparable to my current wheels would set me back about $10,000, after trade-in but before any hybrid tax credits. My alternative is to purchase emissions offsets for the next 5 years, then buy a more efficient model next time around--though it still won't be zero emissions by then. Five years of credits from my current supplier, TerraPass, will cost me $150 and offset 100% of my emissions. This is a no-brainer.
The Journal lists half a dozen carbon offset providers, with varying costs of reductions. European companies are going to have higher costs, reflecting the pricier emission credits markets in countries bound by the Kyoto Protocol, or credits from projects participating in Kyoto's Clean Development Mechanism. If you can reduce your own emissions directly at a lower cost than paying for offsets, such as with more efficient lighting, then you should do so. But if you can't replace every car and appliance with an ultra-efficient model--and of course there isn't enough manufacturing capacity in the world for everyone to do that in the same year--then offsets provide a nice, efficient medium-term alternative. And there shouldn't be an iota of guilt associated with using them that way.