Tuesday, 23 October 2018

Should we (and companies) offset our emissions?

Last year I took an airline flight and considered offsetting the carbon emissions. Several of my friends have done so too. Recently I was reminded that companies such as Marks and Spencer offset their emissions so that they are carbon neutral. I would be the first to agree that we all need to reduce our own emissions, not just pay someone else to do it for us. (And M&S have reduced their emissions substantially already [1]). However it seems to me it ought to be better to offset than not. How many people do this? Not many, it seems, as the total voluntary carbon offsetting market is tiny. In 2016, the equivalent of 43 million tonnes of CO2 was offset globally [2]; that is only 0.1% of global GHG emissions [3]. The projects supported by offsetting are clearly worthwhile, but could they be funded another way? How much would it cost to offset our own emissions?

Offsetting a return flight to New York costs £4.20 at global market prices.
Offsetting is cheap. For example, a return flight to New York is about 1.8 tonnes return [4]. Looking at the Gold Standard project pages it seems you can offset for around $10/tonne or £7.70/tonne so that flight comes to about £14. Companies like Marks and Spencer probably pay considerably less than this. In the global market the average price is just $3/tonne [5]. At that rate the flight would be only £4.20.

Carbon offset projects can be renewable energy, energy efficiency, tree planting, preventing non-energy emissions and more.
Carbon offsetting covers a wide variety of activities. On the Gold Standard website I found projects like these:
  • Providing water filters, so the local people can have clean water without having to boil it first, saving fuel. The filters are manufactured locally, creating employment.
  • Clean power (wind turbines and associated infrastructure including roads and transmission lines) – one project in India is also linked to education, health programs, provision of clean water and local employment.
  • Providing household scale biogas generators, reducing the need for wood fuel, reducing emissions and also relieving pressure on trees and biodiversity.
  • Installing equipment at a landfill site in Turkey to collect the methane and use it to generate electricity rather than it leaking into the atmosphere.
  • Reforesting degraded areas in Ethiopia.

All carbon offset schemes require the savings are real and would not have happened otherwise. The Gold Standard requires benefits to local people as well.
I like the Gold Standard scheme for two reasons. Firstly, it is supported by a raft of respected institutions include World Wildlife Fund, Climatecare, World Resources Institute, IUCN and Fair Trade. Secondly, in addition to the normal requirements for verified carbon offsets they insist on social benefits, with the involvement of the local population, fostering local experience and knowledge, contributing to biodiversity. Most other schemes only require the carbon savings. They all insist that the savings are real (compared to a plausible business as usual scenario) computed using a standard methodology, that they are additional (would not have happened without the funding) and that the savings will not ‘leak’ i.e. shift the emissions to another place or another time.

There have been scams in the past.
In the past there have been some dreadful scams related to offsetting. For example Russia and Ukraine were found to have dumped a huge amount of bogus carbon offsets onto the market in 2012. Also the European Emissions Trading System has been abused on a large scale. Offsets are supposed to be registered and retired when used, so you don’t have several organisations claiming credit for the same offset. However, registries have been hacked and carbon offsets stolen and resold multiple times.

At the lower end of the price scale offsets are traded often before being retired. At $10 or above they are normally bought only once and retired immediately.
It is interesting that over four years to 2016 total traded volumes of carbon on the market have been roughly steady [5] while the amount of carbon actually offset has doubled [2] and overall market value has halved. This suggests that the market is more steady. Offsets are traded less often before they are retired (thus reducing the traded volume). However, trading is still lively at the bottom of the price range, which is why the average price has reduced. This is not surprising as there is more margin to be made there. However above about $10/tonne most offsets are bought and retired immediately [5].

Verifying emissions savings is costly. Arguably it is more efficient just to give to a charity.
I have not found any reports of scandals recently. However, it is clear that verifying emissions savings properly is quite an administration overhead. According to Ethical Consumer magazine only 30% of the money paid for carbon offsets goes to the actual project. However, that estimate was based on the Clean Development Mechanism linked to the Kyoto Protocol which is notoriously bureaucratic [6]. Arguably it would be more efficient to just give a donation to a suitable charity and be done with it. That is what I did last year when I wanted to offset a flight - I donated to Practical Action. Some of their projects are directly carbon saving, such as renewable energy or efficient cook stoves, some such as flood resilience are relevant to climate change adaptation; others are not climate related as such but do contribute to community resilience.

Calculating emissions due to energy use is easy. For other products and services it is not.
Suppose you do decide to offset, you first need to work out how much carbon you are generating. The starting point is normally your fuel and energy use. In carbon accounting this is called scope 1 and 2 emissions and it includes the electricity and fuel you use at home and in your car or other vehicles that you own. (Electricity is scope 2. Its emissions are allocated to you even though they are actually generated by the power stations.) Then you get to scope 3 which is products and services that you buy – these have to be kept separate because what is scope 3 for you is scope 1 or 2 for the supplier.

For indirect emissions, you have less influence but they are generated on your behalf.
Suppose you take an airline flight for a holiday. It is easy enough to calculate your share of the emissions on the plane (using published carbon factors [7]) and you don’t even have to do that – there are online calculators to do it for you, and some airlines allow you to tick a box to offset your ticket with ultimate convenience). But is it really your responsibility or that of the airline? They fuel is consumed in their vehicle but you have purchased the service. It gets worse too: consider a shirt from M&S. There might have been dozens of companies involved in growing or making the yarn and buttons, dying, cutting and sewing and freighting it to the store. The only bit that is scope 1 for you is if you take it home in your car. However, indirectly you have caused the shirt to be made and those emissions have been generated on your behalf.

An AI/block chain solution (maybe).
There is at least one company working towards making offsetting product emissions easy. Poseidon's goal is that we can offset carbon simply, even for relatively small items such as shoes, as and when we buy them. They will partner with retailers to do this and they have an AI system to calculate the emissions for each product. The offsets are recorded using a block chain scheme for accountability.

Large companies are required to publish accounts, but only for fuel and energy use.
Large companies are required to publish carbon accounts but only for direct emissions scope 1 and 2 [8]. This avoids double counting. Some also report scope 3 items such as business travel (flights, trains etc) or freight but this is voluntary. When M&S says it has offset its emissions, it is only referring to emissions from their own premises. Also M&S generates renewable energy on some of its sites which count as negative emissions. Their carbon accounts do not include the emissions from manufacturing the goods sell to you [1].

An average household fuel and energy use including one car is about 6 tonnes, costing £50 to offset – about £1/week.
You could calculate carbon accounts for your household as if it was a company. For example, the table below shows scope 1 and 2 emissions for an average household with a car. The total is 6.3 tonnes carbon. So this might cost you about £50 to carbon offset through the Gold Standard.

Carbon factors from [7]
Average electricity bill3,100 kWh0.28307 kg/kWh
877 kg
Average gas bill12,000 kWh0.18396 kg/kWh
2,207 kg
Average car8,000 miles0.27927 kg/mile
2,234 kg
6,318 kg

However, your indirect emissions can easily be 5 times your direct emissions. Most carbon calculators try to include at least some of your emissions due to products and services such as food, clothing and other stuff. It is difficult to do accurately so they typically estimate it from how much you spend. For food, some calculators ask questions like if you are vegetarian and if you mainly buy locally produced food.

Offsetting makes little difference to the cost of energy consumption.
The cost of offsetting is much less than your actual energy bills. For example, consider 1kWh of electricity which costs you about 14p. Offsetting through the Gold Standard at £7.70 per tonne costs about 0.2p. This means that for us as well as for companies, offsetting makes little difference to the cost of energy consumption.

Large companies pay taxes on carbon or energy but the revenue is spent on other things than carbon saving.
Large companies in the UK are usually liable for other taxes related to energy use. The Climate Change Levy applies to electricity gas and solid fuels but not transport fuel. It is based on energy use, not carbon but the current rates work out at about £11/tonne. This does not apply for companies that trade in the European Emissions Trading Scheme. For them the UK has a carbon price floor that is currently £18/tonne. But all these taxes go into the general tax pool and are not allocated to climate change related projects.

Carbon offsetting is cheap – so why not do it (or give the equivalent to charity)?
Carbon offsetting projects in developing countries will never be enough to bring global emissions down to the level we need. Also the cost of offsetting is so little it can hardly be regarded as a punitive cost or much of an extra motivation to reduce energy use. However, the fact that the cost is so little also makes it harder to argue against. If you don’t trust the offsetting schemes you might prefer to give to a charity or another organisation that you think will make more efficient use of your money for climate change actions.

[1] Climate Change (business wide) M&S

[2] Voluntary carbon market volumes close to record high (International Carbon Reduction and Offset Alliance) June 2017
[3] Based on 37 billion tonnes in 2017 from Analysis: Global CO2 emissions set to rise 2% in 2017 after three-year ‘plateau’ (Carbon Brief) November 2017

[4] 1.8 tonnes per person for a return flight London to New York, including radiative forcing, (using https://calculator.carbonfootprint.com/calculator.aspx)

[5] Report: State of the voluntary markets 2017 (Convention on Biological Diversity)

[6] A short guide to carbon offsets (Ethical Consumer) Dec 2017

[7] Government emission conversion factors for greenhouse gas company reporting

[8] What do UK businesses need to know about the government’s new streamlined energy and carbon reporting (SECR) framework? (Carbon Trust) Sep 2018

1 comment:

  1. I have read about the scam in Ukrain. It was on a large scale.
    Solar Energy


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