Arnold runs TerraPass, a web-based startup company that bills itself as "a leading retailer of carbon offsets"--the latest trend in green marketing, aimed at affluent, eco-sensitive consumers eager to fight global warming. Criticism of the extravagant gift bags offered to Academy stars in years past--the free jewelry, high-end cosmetics and other expensive goodies created unexpected tax liabilities and unflattering press coverage--led to discontinuing the practice, until Arnold suggested a gift enabling those who are among our highest energy users to lighten their "carbon footprint."
The Oscar gift packs--dispensed to ninety carbon-emitting Hollywood icons, including Jack Nicholson, Cameron Diaz and Clint Eastwood--were a publicity coup for TerraPass. "If we want to influence a big environmental issue, engaging celebrities and engaging people's heroes and role models is a really good place to start," he says. "You get tremendous leverage."TerraPass and a burgeoning number of carbon offset services help people calculate how much carbon dioxide they generate, and how much investment is needed in carbon-reducing technologies to make up for--"offset"--the damage caused by their activities. Essentially it's a form of self-taxation: If the government and mega-corporations won't fund the switch from a fossil fuel-based economy to an alt-energy system, the consumer can. In recent years offsetting has ballooned into an annual business of $30 million. But some environmentalists are decidedly skeptical of the concept, seeing the industry as akin to the medieval church practice of selling indulgences to sinners--noblemen who ate meat on Friday or did something bad to a servant girl could, with the proper donation, have their spiritual records expunged. The eco-fantasy of offsets allows people the illusion of having it both ways: Burn lots of jet fuel but avoid doing harm.
On a practical level, while the money raised by offsets can be useful, new doubts are emerging about the industry's basic accounting. A December 2006 survey of the offset business, compiled by a team of specialists in the field, criticized the majority of the companies hawking the product. "There are no widely accepted standards...as to what qualifies as an 'offset' for purposes of making consumers carbon neutral," notes the report, titled A Consumer's Guide to Retail Carbon Offset Providers. "Almost anyone can offer to sell you almost anything and claim that this purchase will make you carbon neutral." Commissioned by Clean Air-Cool Planet, the study looked at thirty firms and gave the majority of them poor marks.
Whatever their intentions, these companies operate in an accountability vacuum. While the Kyoto Protocol established widely accepted guidelines for countries looking to offset their greenhouse gas emissions, at the consumer level there's little agreement about anything--no universal standards for estimating a person's carbon footprint, no agreement on the technologies that are most helpful in reducing global warming and no regulatory body to oversee the industry.
"It's like the Wild West out there," comments Anja Kollmuss, a member of the Climate Initiative team at Tufts University, which has studied the difference between the regulated and unregulated carbon markets.
To really understand the controversial new world of carbon offsets, you need a quick primer on the Kyoto Protocol. The protocol enshrined the offsetting concept by creating something called the Clean Development Mechanism.
The CDM works like this: While Kyoto requires wealthy nations to cut back on greenhouse gases within their borders, they can get credit for investing in industrial-scale eco-projects in the developing world. In other words, the more affluent nations are offsetting their pollution by helping to trim greenhouse emissions elsewhere. (And they're doing so because it's generally cheaper to undertake antipollution efforts in less developed countries.)
The projects are verified as green and working by the CDM executive board, a wing of the United Nations. Examples include a Brazilian paper plant that generates electricity from leftover wood pulp (Britain funded that); a 24.65-megawatt wind farm in China (Sweden and the Netherlands underwrote it); and ambitious plans to convert the manure of Indian cows into cooking fuel for more than 5,000 homes (thank you, France). Under CDM rules, offsets are only granted for new--or "additional"--antiwarming projects that wouldn't have been launched otherwise. For example, if a Bolivian power company erects an array of wind turbines to meet its government's regulations on renewable energy, that project is not additional, because it would have happened without outside support.
Here in the United States the deals offered by TerraPass and other web-based outfits like DrivingGreen, Climate Care, the Carbon Neutral Company and the Bonneville Environmental Foundation promise to offset consumers' contributions to rising temperatures through investment in green endeavors such as wind and solar energy, tree planting, etc. But there are no hard and fast rules governing the retail sales of offsets--some of which are questionable, and many of which wouldn't meet CDM standards. Some of the offsetters are for-profit corporations that make money from each offset sale, while others are nonprofit organizations.
In the case of TerraPass, one of its major offset investments--and this gets complicated--takes the form of climate offset derivatives sold on the Chicago Climate Exchange for a methane-burning dump owned by Waste Management. A publicly traded company with $20 billion in assets and a long history of environmental abuses, Waste Management is hated by most enviros. In filings with the Securities and Exchange Commission, the company admits to facing four lawsuits for allegedly transgressing state and federal air pollution laws. Waste Management owns sixteen of the most toxic sites in the country--all locations listed on the EPA's Superfund roster--and is budgeting more than $260 million for environmental remediation at its landfills and dumps, SEC records show.
In the wake of the Oscars giveaway, Business Week revealed that TerraPass takes credit for funding methane-burning machinery at a Waste Management dump near Springdale, Arkansas. Because methane traps twenty-one times more heat than carbon dioxide, burning it--which transforms it into carbon dioxide--is actually environmentally beneficial. (Better still, though, is capturing methane and using as an energy source rather than "flaring" it off.)
But was it TerraPass's cash that induced Waste Management to make this earth-friendly move? In fact, Business Week discovered documents showing that Arkansas officials had pressured the company to install the equipment as early as 2001. Further, Waste Management planned to purchase the methane-burning system long before TerraPass got involved. The deal raises the question of whether consumers really need to be making charitable donations to Waste Management, a giant corporation with a scandalous environmental record.
For its part, TerraPass has launched an ongoing internal investigation into whether the deal was proper. But, in general, says TerraPass's Tom Arnold, large corporations like Waste Management should not be excluded from the offset business. "We cannot fight climate change without major corporations on board," he notes, adding, "We expect carbon offsets to be controversial. It's complex and it's turning into a political issue."
Other offsetters employ different strategies. Climate Care, based in Britain, shipped nearly 10,000 highly efficient compact fluorescent light bulbs to Kazakhstan, where electricity is generated mostly by older, wasteful coal-fired power plants, and the firm is sending another 10,000 or so bulbs to the island of Majuro in the Marshall Islands. Another firm, CO2balance.com, plants trees on former farmlands in England.
Forestry projects are controversial among global warming analysts, because it takes years for saplings to mature and start sucking up sizable quantities of carbon dioxide--plus, when the trees die and decompose, they release that CO2 back into the air. Research shows that planting trees in places with a moderate climate is less effective than sowing trees in warmer zones.
The Portland, Oregon-based Bonneville Environmental Foundation, a nonprofit, funnels money to wind and solar plants that are already up and running. Sales director Patrick Nye says the money "sends a good market signal that we should continue to invest" in renewable energy. But are charitable donations to private investors really the best way to promote the growth of utility-scale renewables? After all, the decision to invest is far more likely to be influenced by government policies and the potential for profits than the possibility of receiving such donations.
Then there are deeper questions about the very idea of offsetting. The December 2006 study of the offset industry suggested that consumers are getting bamboozled. "Because a carbon offset is an intangible commodity, it is very difficult for consumers--even environmentally savvy ones--to differentiate between a high-quality and a low-quality offering."
The report went on to rate thirty offset firms on a scale of one to ten, with ten being the best score. Three-quarters of the firms scored below five because of "a basic lack of information and transparency" and "a lack of attention to offset quality."
Under such conditions, "there's a very heavy potential for scams and fraud," says Dave Hamilton, who directs the Sierra Club's global warming and energy program. "We have to make sure people aren't paying for nothing."
For consumers, figuring out where the money goes is only the half of it. There's also the matter of measuring the size of the carbon footprint they want to offset.
Consider a typical scenario: Someone with a little extra income wants to offset the emission of her car, say a late 1990s Volkswagen Jetta she drives roughly 15,000 miles a year. The first step is to visit the website of an offsetter to see how much CO2 the vehicle is belching and how much it will cost to defray the damage. According to the TerraPass site, that car spews out 5.22 metric tons of carbon particles annually. Bonneville, on the other hand, puts the figure at 5.55 tons, while a third firm, DrivingGreen, says the Jetta emits just 2.99 tons. Each site allows users to input different data, thus producing the dramatically different results.
The wildly divergent figures, says Bonneville's Nye, reflect the lack of a "national protocol" for measuring a car's carbon output. DrivingGreen director Dan Linsky wasn't aware of the discrepancies until we contacted him for this article.
The prices vary dramatically as well. For example, $49.95 buys 15,000 miles' worth of offsets from TerraPass. That same year of offsets can be purchased for $24 from Driving Green or as much as $216 from Bonneville.
Exactly how that money is being spent is hard to determine--most of the for-profit firms we spoke with wouldn't reveal exactly how much money they're passing on to carbon-curbing projects. Bonneville's tax returns show that the foundation sold $1.8 million worth of offsets under the Green Tags brand name during its last fiscal year; the foundation directed about $1.2 million toward wind and solar facilities.
While the ideas implicit in offsets are worthy--the impulse to address climate change, the willingness to pay for it, the interest in green technologies--many enviros see the whole debate on offsets as something of a distraction. At the Sierra Club, for example, climate change experts think carbon-conscious people should concentrate on minimizing their use of electricity and oil rather than compensating for that damage with offsets. Sierra's Hamilton thinks the desire to buy offsets reflects an earnest desire to do something about global warming, but he adds, "What we really need is to get people focused on how they can make reductions" in energy consumption. "Our message, essentially, is that as a society we need to reduce our emissions by 2 percent per year for the next forty years," he says. "We're not going to do that through offsets."
