everything zero web

8/7/2019 Everything Zero Web

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TM

EVERYTHING

YOU WANTEDTO KNOW ABOUTOFFSETTINGBUT WEREAFRAID TO ASKRon Dembo and Clive Davidson

A Zerofootprint Publication


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CONTENTS

1 Preface9 Introduction18 What is Offsetting25 History of Offsetting33 Offsetting as a Pricing Mechanism for

Environmental Impact52 Types of Offsetting58 Why Trees?72 The Science and Measurement of Offsetting85 Additionality, Baselines and Leakage95 Carbon Trading117 Offsetting Standards135 Frequently Raised Objections to Offsetting152 Conclusion155 Glossary


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I dedicate this book to my daughters Justine andElla and to the next generation, who will have

to live with our legacy

Ron Dembo

Toronto, April 2007

For the birds and squirrels and all creatures wholove trees, including my children and

grandchildren

Clive Davidson

Haslemere, England, April 2007


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PREFACE

We all know the scale of the problem of climatechange by now. Global warming is disruptingweather patterns, endangering ecosystems andultimately threatens the entire planet.

It is the biggest, most serious problem human-ity has ever faced, and we have caused it. But hav-ing taken hundreds of years to unfold, primarilythrough the burning of fossil fuels since theIndustrial Revolution, climate change is notamenable to any single or short-term solution. Itwill take new technologies, new processes, and anew attitude by individuals and societies towardsthe Earth.

Our priority must be to reduce and eliminatecarbon dioxide and other greenhouse gas emis-sions wherever possible. There is much we can doimmediately to create new green energy sourcesand manufacturing processes and to change someof our wasteful energy habits. But other areas stillrequire research and development, long-termplanning and a massive transfer of financialresources. Meanwhile, our power plants, factories

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and cars continue to spew carbon into the atmos-phere. And time is running out.

There is something else we can do, however,while we invent new technologies and plan newgenerations of wind farmswe can offset some ofour emissions. Where we produce carbon dioxidethrough one activity, say by driving our cars orheating our homes, we can offset it by funding aproject that will eliminate or absorb an equivalentamount of carbon elsewhere. Since the effects ofgreenhouse gases are global, and emissionsreleased in one place can be counterbalancedsomewhere else, we are free to fight climatechange wherever we can do the most good.

Given that climate change is a problem that canbe solved only by tackling the root causes, offset-ting can seem like tinkering at the edges. But off-setting can have a real impact, not only on theoverall volume of greenhouse gas in our atmos-phere, but in helping change the fundamentalsthat caused the problem in the first place.

TAKING THE EARTH INTO ACCOUNTOffsetting puts a price on carbon. By setting amonetary value on the reduction or elimination ofan amount of carbon, offsetting counts the cost of

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greenhouse gas emissions. Once we accept this,we accept that environmental impact must be afactor in our economy.

We will no longer be able to take a long-haulflight, leave our computer on overnight or buyimported fruits or vegetables without having topay for the impact of these actions on the Earth.Energy companies will have an incentive to buildclean technology power plants, and businesseswill no longer be able to ignore their environmen-tal responsibilities because they will have to payfor their emissions.

Offsetting is only part of the equation.Regulation and carbon trading schemes help cre-ate the incentives for offsetting. If emissions arecapped, either by regulations or cap-and-tradeschemes, polluters are forced to find solutions. Ifreducing or eliminating emissions at their sourceis cheap, like turning off computers and lights atnight, businesses might adopt these policies first.If notif a factory would have to install expensivecarbon capture and storage technologythen itwill look to offset. At first, offsetting might becheaper, but as the easy offsetting projects arecompleted and their carbon credits bought up, andas regulation tightens, the cost of carbon offsetswill steadily rise. Eventually, it will hit the point

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where it is cheaper for the factory to install carboncapture and storage than to try to buy an offset.

People may object to the fact that offsettingand carbon trading schemes are market-basedsolutions to what is really an ethical issue. Buthoping that the world is going to have a suddenchange of heart on capitalism is unrealistic. Evenour poorest societies now operate as cash ratherthan bartering economies, so we have to workwith the systems we have. Pricing is one of capi-talisms most effective tools, and offsettingenables us to link climate change mitigation intothe market.

A CULTURAL LEAPOffsetting is a short-term fix for a deep and longterm problem, but it does represent a new direc-tion: it prices our environmental impact into themarket economy. On an individual level, wherepeople voluntarily offset their travel, home energyuse and so on, it starts a cultural change. Webegin to accept that our actions have a cost to theEarth, and we acknowledge that we must pay up inone way or the otherby changing our behaviouror finding other solutions.

Voluntary offsetting is often criticized as a sop

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to the conscience of people who pay only lip serv-ice to environmental responsibilitypeople whoshould know better but who insist on flying to dis-tant lands for holidays, or businesses seekinggood PR for appearing carbon neutral. While theremay be some truth in this, the greater truth is thatthe world will not change overnight. No amount ofmoralizing about offsetting will close down allcoal-fired power stations, or suddenly upgradepublic transport so that no-one need use their caragain, or instantly recreate local economies thatproduce their own fruit and vegetables and otherproducts.

In the meantime, offsetting will bring aboutreal, measurable reductions in atmosphericgreenhouse gases. Credits for nearly 600 milliontonnes of carbon saved were sold in 2006 in theregulated market alone. Questions are sometimesraised about the validity of these estimates andthe schemes themselves, but this is a matter ofstandards and auditing. This is no different fromany other endeavor, such as organic farming orpharmaceutical production, and offsetting stan-dards are evolving quickly and are being imple-mented across the globe.

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THE BEAUTY OF TREESThere is one type of offsetting scheme that has aunique role to play in the fight against climatechangetree planting and forest conservation. Onthe one hand, deforestation is estimated to causearound 25 percent of global greenhouse gas emis-sions, so any scheme that halts the clearing oftrees will have a positive effect. Meanwhile, plant-ing new forests is the only viable mechanism thatwe have for actually taking carbon out of theatmosphere.

Trees are Natures carbon scrubbers. While wecan fit a device to a factory chimney to capturegreenhouse gases before they reach the atmos-phere, we know of no other way to clean up the bil-lions of tonnes of carbon we have already pumpedinto the air except through trees and healthyecosystems. Moreover, while the technology forcapturing carbon is ready, the answer of where toput it is not. Norways Statoil is currently injectingcarbon dioxide (C02) into permeable rock forma-tions beneath the seabed. However, questionslinger about our capacity to transport C02 to siteswhere it can be pumped underground, to say noth-ing of the possibility of leakage or even a cata-strophic release that could quickly raise atmos-pheric concentrations or even poison humans and

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animals in the area. It currently costs about $100per tonne to store C02 undergroundseveraltimes the cost of storing it in trees.

And forests are more than just carbon farms.Provided tree planting and forest conservationschemes are done with sensitivity and under-standing, which is, again, a question of educationand standards, they bring many other benefits.These benefits include providing wildlife habitatsand biodiversity, preventing soil erosion, helpingto purify water sources, providing food (nuts,fruits, berries) and shelter and recreation, and, ifmanaged sustainably, acting as a source ofrenewable energy, as well as building materials(building materials that store carbon instead ofreleasing it), mulch, medicines, and much more.Trees are solar powered, and their exhaust is oxy-gen. There is no downside with trees.

PART OF THE SOLUTION, NOT THEPROBLEMOffsetting is not a perfect solution, or a total solu-tion. It is an interim measure while we find andimplement other solutions. It is a way of pricingcarbon, and environmental impact in general. Inthe end, this is not just about greenhouse gases

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and global warming. We cannot go on using up theEarths resources at our current rate: we have tofind more sustainable ways of living. Offsettingcan be applied to far more than just carbonforexample, water use or chemical and other pollu-tion. Indeed, it already has.

By raising awareness and enabling people totake responsibility for the impact of theirlifestyles, offsetting can start to bring about cul-tural and behavioural change. By pricing carbon,offsetting brings market forces to bear on ourmost grave and urgent challenge.

And by planting and protecting trees we have achance at tangibly improving the future of theEarth and the lives of people who live here.

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INTRODUCTION

There is an old sayingif you cut down a tree,plant another one. In more circumspect cultures,they suggest planting two. But the principle is thesame: if you are going take an action that has animpact on the environment, make sure you dosomething to restore the balance.

This is a lesson that the world forgot while itwas busy industrializing over the past two hun-dred years. In fact, it is more accurate to say thatit is a lesson that the developed world chose toignore while it was surging ahead with its machin-ery and factories, power plants and automobiles.The Industrial Revolution created an economicand social transformation that continued with theintroduction of steam-powered trains and ships,electrical power generation and the internal com-bustion engine. The new technologies and energysources revolutionized how people worked andlived, generated unprecedented prosperity andcreated a new culture based on consumerism.

The exploration and colonization of the worldthat took place at around the same time revealed

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an unprecedented abundance to be exploited.Everywhere there were discoveries of iron, coal,cotton and other raw materials. These wereshipped to the factories of Western Europe andNorth America to be turned into an endless supplyof new goods. And then there was oil, a whole newenergy source that accelerated the pace ofdevelopment.

Meanwhile, the Earth was forgivingor so itseemed. Factories and coal-fired power plantspumped carbon dioxide and other gases into theatmosphere. Chemicals and waste spewed intorivers. Forests were clear-cut for their timber.Cars and trucks belched exhaust fumes acrossthe land. While this caused localized pollution orenvironmental degradation, there was little visi-ble evidence of wider or longer-term effects.Besides, the new prosperity was too beguiling tostop and question. Once sampled, few chose toreturn to a life of agricultural subsistence ormanual labour. Many, of course, did not have thechoice.

Eventually, city smog and toxic rivers forcedlocal authorities to start introducing pollution reg-ulations, and civic engineering works such assewers and water supplies improved urban envi-ronments. Meanwhile, some insightful thinkers

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started to ponder more deeply the consequencesof the new way of life.

One of the first people to speculate on theimpact of industrialization on the world was theBritish scientist John Tyndall. Born to humble ori-gins in Ireland in 1820, Tyndall became a Fellow ofthe Royal Society, the worlds oldest learned soci-ety, and was famous for asking questions such asWhy is the sky blue? and Why do glaciersmove? Tyndall, who loved climbing in the Alpsand who spent every summer there until his laterlife, was intrigued by the characteristics of theatmosphere, and the effects of changes in itscomposition on all sorts of phenomena, such aslight and sound. He devised experiments todemonstrate that water vapour, carbon dioxide(C02) and ozone absorb far more heat than the airin general. He arrived at this bold and prescientconclusion: change the composition of the atmos-phere by increasing these constituents and youwill change the climate. In honour of his insightinto the origins of the greenhouse effect, BritainsTyndall Centre for Climate Change Research, oneof worlds leading global warming researchorganizations, is named for him.

Yet, it took a long time for scientists to finddefinitive evidence of the accumulation of C02 in

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the atmosphere and to start to link it to alter-ations in the weather. It wasnt until the late1950s that scientists began regularly measuringthe concentration of C02 in the atmosphere, atfirst high up on Mount Mauna Loa in Hawaii andthen elsewhere, and revealed its inexorable year-on-year rise. In the late 1980s, global tempera-ture data demonstrated the same patterntheEarths temperature was on an upward trajectory.The link was there for all to see, and globalwarming was confirmed. Since then, not a daygoes by without some further evidence of howgreenhouse gases affect the climate and influ-ence global ecosystems. Our failure to heed thewisdom of balancing our impact on the Earth hascome back to haunt us with a vengeance.

RESPONDING TO CLIMATE CHANGEIf you know something is causing harm, your firstreaction is generally to stop doing whatever iscausing the damage. We now know that carbondioxide and other greenhouse gas emissions(mainly methane, nitrous oxide and certain fluoro-carbons) from human activities are causing globalwarming, and that the results may well be devas-tating. Melting ice caps and glaciers will cause the

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seas to rise, flooding coastal cities and low-lyingareas. Crops will fail from increased temperaturesand changing weather patterns. Heat waves insome areas, and bitter cold in others, will affecthealth and result in deaths. Diseases such asmalaria will spread. Ecosystems will collapse, andspecies become extinct. The list of potential effectsgoes on, many of them falling disproportionatelyon the poorest regions of the world. In October2006, a report by the leading international econo-mist Sir Nicholas Stern attempted to put a price onthis looming catastrophe, and concluded that ifnothing is done, the cost of global warming couldbe 20 percent of GDP or more for the countries ofEarth. In other words, the worst economic disasterin history.

That is to say, the stakes for our civilizationcould not be higher. The first step must be to cutgreenhouse gases. The primary culprits in globalwarming are C02 emissions from burning fossilfuelscoal and oiland deforestation. We need touse less energy, get our energy from othersources, and we need to stop cutting down trees.

Reducing our dependency on fossil fuels is amassive undertaking. Renewable energy sources,including hydro power and wood fuels, account forroughly 13 percent of global energy use. In

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Europe, only 6 percent of domestic electricity issupplied from renewable sources. There is a longway to go, but much can be done in terms of devel-oping wind, solar, wave and other forms of low-carbon energy generation. Transport accounts foraround 14 percent of C02 emissions, and the firstalternative, fuel-powered cars and trucks are onlybeginning to appear. Significant greenhouse gasreductions will only happen with further techno-logical innovation, greater political will to settighter emissions controls, halting deforestation,and persuading and helping developing countriessuch as India and China not to make the mistakesof the Industrial Revolution.

Meanwhile, there is much we can do as individ-uals to cut our energy consumption and reducethe other emissions we cause as we go about ourdaily lives. Simple things, such as turning offlights, computers and appliances, or automatingthe standby function or fitting energy -savingbulbs, can contribute significantly if done enmasse. Using our cars less, insulating our homesbetter, or recycling or composting our waste allhelp, and must be a priority.

But not everything can be done immediately.With the best will in the world, we cannot as indi-viduals, cities or nations cut our carbon emissions

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to zero tomorrow. Even the most ambitious plansonly envisage reducing greenhouse gases toacceptable levels over a period of twenty to thirtyyears.

London is planning to be a role model for citiescombating climate change. In February 2007, thecitys mayor, Ken Livingstone, announced anambitious series of measures aimed at slashingLondons emissions by 45 percent over twentyyears. This includes shifting at least one-quarterof the citys electricity consumption from thenational grid to local combined heat-and-powersystems (which are more energy efficient and canrun on renewable fuels such as wood chips), pro-viding subsidies for insulation, encouraginghousehold and business energy efficiency, andpromoting fuel-efficient cars. London has alreadypioneered congestion charging, where driversmust pay 8 a day to drive in the inner city, andLivingstone has proposed that this should beincreased to 25 a day for SUVs and other big pol-luters. If successful, the new measures willreverse the growth of Londons annual emissions,which currently run at forty-four million tonnes ayear. Without action, emissions are estimated toreach fifty-two million tonnes a year by 2025;under Livingstones plan, they will be cut to

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twenty-four million tonnes annually.But even these radical measures will not bring

London to the UKs national goal of reducingemissions to 60 percent below 2000 levels. Hittingthat target will require additional national andinternational action, says Mayor Livingstone, inparticular the introduction by governments ofcomprehensive carbon pricing to encourage fasteradoption of existing energy efficiency measures.

The London plan emphasizes the savings andother benefits of energy efficiencyhouseholdscould save up to 300 on their annual fuel bills,while businesses could cut 20 percent of theirenergy costs. But even if Londoners adopt themeasures enthusiastically, they are going to taketime. Heat-and-power generators arent builtovernight, and not everyone can afford to trade intheir car for one of the few, and still relativelyexpensive, hybrid cars. Many houses and officebuildings can be upgraded only so far, before theprice of energy efficiency ceases to be cost-effective. Much of todays business requirestraveleven the most committed climate changecampaigners regularly find themselves on planesand in cars. And most of the food we eat and thegoods we consume involve carbon emissions atsome point in their production.

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As we strive individually and communally, ascitizens, businesses and nations, to reduce ouremissions we will inevitably be found wanting inthe short- to medium-term. But there is some-thing else we can do in the interim to help restoreNatures balance. It is not the solution to globalwarming, but it can make an important contribu-tion to mitigating climate change on a number oflevels. We can offset.

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WHAT ISOFFSETTING?

The idea of offsetting is to counterbalance theeffect of whatever we do , using an equivalent ofwhatever we used to do it.

Our world is out of balance in terms of thegreenhouse gases in the atmosphere. If we dontdo something about this, the gases will warm theplanet, causing possibly irreversible climatechange and global devastation. While we deviseways to cut carbon emissions directly, we can alsolook to counterbalance the production of thosethat we cannot immediately prevent by using anequivalentin this case, the absorption of anequal amount of C02, or the avoidance of an equalamount of emissions elsewhere.

Lets be clear from the startoffsetting doesnot solve the problem of global warming on itsown. That is, we cant all pay someone else toavoid, reduce, or remove carbon from the atmos-phere. But it is also true that we are not going tosolve the problem without offsetting. As well see

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in later chapters, it can help cut the cost of reduc-ing emissions, thereby enabling more to beachieved with the available funds. It buys timewhile homes are insulated, heat-and-powerplants are constructed, public transport isimproved, and new green technologies areinvented and implemented. And it allows individu-als and organizations to make a difference withoutwaiting for legislation to catch up.

Perhaps most important of all, offsetting canhelp bring about the cultural change that will benecessary to defeat climate changea changewhereby we come to accept that environmentalimpact has a price, and we must pay for the car-bon we are responsible for emitting. It can alsohelp tackle one of the major causes of globalwarmingdeforestationby providing funds forthe protection and restoration of forests.

The idea of offsetting is as old as civilisation.The saying if you cut down a tree, plant anotherone is the essence of offsettingcounterbalancing with an equivalent. Farmers andgardeners have known this from earliest times.You can plant a field and use up its nutrients foronly so long before you have to leave the land to liefallow and regenerate. Or you must plant rotationcrops that balance what they use and give back to

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the soil. Come harvest time, you must set asideenough seed for next years crop, and so on.

The Bible tells the story of the pharaoh whowas perplexed by his dreams of seven fat cowsbeing devoured by seven lean cows, and sevenhealthy ears of grain attacked by seven other earsthin and blasted by the east wind. Agitated onwaking, Pharaoh called for his magicians andsages to explain the portent of his visions. Whenthey failed, he sent for the Hebrew slave Joseph,who had a reputation in the dungeon where hewas imprisoned of being able to interpret dreams.

It is not I but God who will give Pharaoh theright answer, Joseph said, and he proceeded tooffer his explanation. The seven fat cows andhealthy ears of grain were seven years of greatabundance that Egypt would enjoy. But thesewould be followed by seven years of famine.

Let Pharaoh appoint commissioners over theland to take a fifth of the harvest of Egypt duringthe seven years of abundance, said Joseph. Theyshould collect all the food of these good years thatare coming and store up the grain under theauthority of Pharaoh, to be kept in the cities forfood. This food should be held in reserve for thecountry, to be used during the seven years offamine that will come upon Egypt, so that the

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country may not be ruined by the famine.Pharaoh took Josephs advice and offset the

years of abundance against the years of famine tocome.

One of the models for modern offsetting isdouble-entry accounting. This method, thought tohave been devised by a Florentine merchant in thefourteenth century, records every transaction ofan organization in two accountsdebit andcreditand seeks to balance the two. So if theorganization buys a filing cabinet for $100, itrecords the value of its assets as increasing by$100, and the amount that it owes increasing bythe same amount. When it pays off the invoice, itrecords the amount that it owes and the total in itsbank account, as decreasing by $100. If everythingis recorded faithfully, adding up all the entries atthe end of the day should produce a balancedbook.

The beauty of this system, as opposed tosingle-entry bookkeeping where everything isonly recorded once, is that it allows the organisa-tion to enter into a far more complex web oftransactions without losing control of itsfinances. At any moment, the organization candetermine how much it owes its suppliers, howmuch its customers owe it, how much it has in the

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bank, how much tax it will have to pay and so on.Across the accounts, debits should match credits,unless there is a profit (which should be matchedin the accounts as deposits in the bank or invest-ments) or a loss. The Medici bankers in theRenaissance were quick to spot its effectivenessand adopt its methods, and the merchant ventur-ers of Venice exploited its power to help build theirglobal trading empires. The system was eventu-ally codified by Luca Pacioli, a Franciscan monkand collaborator of Leonardo da Vinci, and histori-ans have compared its economic impact with thediscovery of the steam engine three hundred yearslater.

Double-entry accounting enables losses in onearea of a business to be offset against profits inanother, or costs to be offset against tax, and soon. It has become part of how we think aboutmoney and running our lives. Earnings from anextra shift at work can be put to offset the costs ofa family holiday; the extra expense of a more effi-cient fridge is offset by the savings on electricity;and so on. Banks now offer offsetting accountsthat link an individuals current, savings and mort-gage accounts, offsetting the credit in the currentand savings account against the debit in the mort-gage account before calculating the interest owed.


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Double-entry bookkeeping allows for the bal-ancing of debit and credit transactions to beextended over time and place without losingaccountability. A company might have its head-quarters in New York, manufacture in Mexico andhave its primary markets in California and theEast Coast, and still keep track of, and balance, itsrevenue and outgoings. Similarly, since green-house gases are distributed globally, once theyare in the atmosphere, it doesnt matter where or,to some degree, when emissions are made andoffset, as long as the books balance. This meansthat an offset can be off-site. So if a factory inBulgaria pumps ten thousand tonnes of C02 intothe atmosphere, it can be offset with a wind farmin Australia that saves an equivalent amount(assuming the Australian project qualifies asadditional, a criterion well return to in latersections). Or the emissions of the cars of a thou-sand people in Europe can be offset by a series ofprojects across Africa and Latin America, whichmight include deforestation prevention, landfillmethane capture and renewable energy substitu-tion, which in total save or sequester an equivalentamount of C02. The timelines of the car emissionsand the individual projects may not entirely over-lap as long as the overall amounts are equivalent.

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But despite the long-term success of certainexamples, this is not a long-term solution for sur-vival. Offsets in the plant kingdom are clones, so ifa disease hits one individual, all its clones aresusceptible. Likewise, if there is an adversechange in the environment, all clones are vulner-able. That is why Nature hit on evolution, with itsprocess of mutation and sexual reproduction(genetic crossover) to create new individuals withunique DNA that might be capable of survivingconditions previous individuals could not.

Similarly, carbon offsetting isnt the long-termsolution to climate changeceasing to burn fossilfuels and deforestation isbut it offers an interimsolution that can nevertheless have a significantimpact on global warming.


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HISTORY OFOFFSETTING

One of the first to propose offsetting humaninduced carbon emissions was maverick scientistFreeman Dyson. In 1976, he suggested a worldwideemergency program to plant fast-growing treesand other plants as a temporary response to therising levels of carbon dioxide in the atmosphere.These would act as a carbon bank, buying timewhile society shifted from fossil fuels to renewableor nuclear energy. He insisted that the forests mustnever be harvested as this would break open thebank and let the stored carbon escape. At the time,few people shared his sense of urgency (althoughnow, as evidence of global warming mounts, Dysonhas come to the view that the threat of globalwarming is exaggerated).

US electricity company Applied Energy Services(AES) is generally credited with undertaking thefirst major voluntary carbon offset project. Inorder to gain regulatory approval for a new coal-fired power plant in Connecticut, AES agreed in

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1988 to fund the planting of over fifty million treesin a scheme operated by the US aid organizationCare together with the US Peace Corps andUSAID. The scheme, costing $2 million, involvedforty thousand small farmers planting pines andeucalyptus that would sequester around 16 mil-lion tonnes of carbon to balance the output of theAES plant over its forty-year lifetime. The pioneer-ing scheme was criticized by opponents of offset-ting because of how it affected local communities,the choice of trees used, and the complexity of thecarbon accountingissues that the offsettingmarket had to address, and which emerging stan-dards seek to remedy.

In 1997, organic yoghurt maker Stonyfield Farmbecame the first carbon-neutral company, offset-ting the greenhouse gas emissions from its pro-duction facility in New Hampshire via a reforesta-tion program in Oregon.

Stonyfield grew out of an agricultural collegefounded in the 1980s by Samuel Kayman, anorganic expert who wanted to reverse the declinein family and dairy farming in New England. Thebusiness took off when he was joined by GaryHirshberg, an environmental activist, windmillmaker and entrepreneur, and they expanded theproduction of the schools locally popular full-fat


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plain yoghurt. It was an immediate and enormoussuccess. Today, Stonyfield claims to be the worldsleading organic yoghurt supplier, its productssupporting forty thousand acres of organicfarming.

We started in the early 80s as a farmingschool committed to teaching sustainable agricul-tural practices, says Hirshberg. At first we soldyoghurt only to fund our school. Then we realizedthat a successful organic yoghurt company couldserve sustainable agriculture and the environ-ment better than a school could. So we ran withthe yoghurt.

Minimizing environmental impact was a funda-mental principle of Stonyfields operations fromthe start. As well as applying strict organic princi-ples, with no use of pesticides and careful nurtur-ing of the soil, the company re-uses and recycleswhatever it cantoothbrushes and razor handlesare made from its recycled plastic, for instance.The company switched to low-energy lighting, andredesigned its water heating systems. It recentlyeliminated the plastic over-cap on its six-ouncecups, saving 270 tonnes of plastic annually.Despite these good practices, Stonyfield realizedearly on that there was a certain irreducible levelof carbon emissions related to its business.

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As the company explained in a booklet on carbonoffsetting that it published in 1997, In the case ofStonyfield Farm, emissions result from the dieselfuel that powers the trucks transporting our rawand finished goods. There is an energy cost formoving milk from the farm to Stonyfield, as wellas at the farm itself, where electricity is used topower the milking machines and other farmequipment. The corn and other crops that feed thecows, even if they are grown on the same farm,require energy inputs, such as fuel for tractorsand the natural gas used to manufacture the fer-tilizer. All of these energy expenditures produceenvironmentally-damaging emissions. A com-panys total carbon footprint is much larger thansimply the facility energy use. It includes theemissions resulting from transporting goods,employee travel and commuting, solid wasteincineration, packaging production, and so on.

As an environmentally responsible organizationthat believed it had gone as far as it could toreduce and eliminate carbon emissions,Stonyfield decided to offset the balance. Workingwith consultants Trexler Climate and EnergyServices, the company began offsetting through areforestation project in Oregon. Since then,Stonyfield has offset over twenty thousand metric


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tonnes of greenhouse gases.Like Stonyfield, many organizations and indi-

viduals find that, even with their best efforts, theycannot immediately eliminate all carbon emis-sions. The alternatives are to ignore them, or tooffset. Over the past decade, a host of organiza-tions have emerged to provide offset services tocompanies and individuals, offering a wide vari-ety of schemes at a range of prices. Meanwhile,in parallel to this voluntary market, the KyotoProtocol has led to the establishment of an off-setting industry for mandatory emissionsreductions.

The Kyoto Protocol of the United NationsFramework Convention on Climate Change(UNFCCC) set targets for developed countries toreduce their production of greenhouse gases.

Kyotos Clean Development Mechanism(CDM) and Joint Implementation (JI) -whichwell look at a little later- are essentially offsettingmechanisms, and along with emissions tradingaim to reduce greenhouse gases where it ischeapest to do so (on the grounds that this willachieve most with the money available). CDM andJI have strict rules as to what can qualify as anacceptable project, and clear methodologies forensuring that the emissions reductions are real,


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verified, additional (they wouldnt have happenedanyway) and avoid leakage (they dont cause moreemissions somewhere else).

Kyoto came into force in 2005 and its first phaseruns until 2012. By April 2006, 181 CDM projectshad been registered, promising to deliver 380 mil-lion tonnes of greenhouse gas reductions, with afurther 700 in the pipeline. These cover hydro-electric and wind generation, switching to non-fossil fuels, energy efficiency, adapting industrialprocesses and capturing methane from landfillsites and livestock farms.

Due to a loophole in the way the carbon tradingmarkets were structured, the biggest investmentswere initially made in a small number of largeprojects to capture HFC 23, a hydrofluorocarbonwith a particularly high greenhouse gas effect,and a by-product of Teflon production. Althoughthe capture of HFC 23 is an important contributionto combating global warming, Kyoto aimed toencourage a broader range of projects, particu-larly renewable energy schemes. The loopholehas since been closed, and steps have been takento encourage smaller C02-based projects.

The Kuyasa project in Cape Town, South Africa,is one such small-scale CDM scheme. It is reduc-ing carbon emissions through improving insulation


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in 2,300 homes in the township of Khayelitsha, aswell as providing energy-efficient lighting andsolar water heating. Another project in India isreplacing diesel and unsustainably harvestedwood fuels with solar heating in communitykitchens. The kitchens prepare hot food anddrinks for more than 28,000 people on a regularbasis. In addition to the carbon emissions reduc-tion, the project will help reduce local air pollu-tion, create jobs and improve conditions for thekitchen workers. Additional social and environ-mental benefits are essential to CDM projectsreceiving approval.

A report by the World Bank said that the volun-tary offsetting market traded 6.05 million tonnesof carbon dioxide and other greenhouse gases in2005, while a 2006 report by US consultancy ICFInternational forecasts that by 2010 there will be ademand in the voluntary market for four hundredmillion tonnes of carbon equivalent offsets. PointCarbon, an Oslo-based carbon analyst group, saysthat 226 million tonnes worth of carbon creditsfrom CDM and JI projects were traded during thefirst half of 2006. The UNFCCC says that the CDMis on course to generate one billion tonnes of cer-tified emissions reductions by 2012.

Offsetting is a rapidly developing industry with


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considerable innovation and entrepreneurship. Aswith any new and evolving process, it has gener-ated a number of issues, many of which are beingaddressed by emerging standards. Both theissues and standards are reviewed in laterchapters.


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OFFSETTINGAS A PRICINGMECHANISM FOR

ENVIRONMENTALIMPACT

How could the Earth reach a point where globalwarming threatens to spark cataclysmicevents coastal flooding from melting polar ice-caps, catastrophic hurricanes and collapsingecosystems? Ignorance, partly. It wasnt until the1980s that scientists started gathering convincingevidence that the planet might be warming as aresult of the accumulation of greenhouse gases inthe atmosphere. Even then, there was littleattempt to cut emissions. And now, as it isincreasingly clear that we are heading for a catas-trophe unless we take drastic action to reduceemissions, governments, companies and individu-als continue to drag their heels.

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WHY?Because there is no cost attached to producinggreenhouse gases, and therefore little disincen-tive besides a moral imperative. Apart from therecently introduced carbon caps in the Kyotoagreement, there has never been a price to pay forcarbon emissions, nor, except in a few instances,has there been for any other environmentalimpact.

One of the problems in attempting to introducea cost is calculating an appropriate price. TheKyoto-based carbon trading schemes with penal-ties for failing to meet carbon targets is onemethod. A broader mechanismand one that canestablish a real priceis offsetting. Since offset-ting involves undertaking actions in the real world,with measurable costs, to compensate for green-house gas emissions or ecological damage, it pro-vides a way of calculating an actual price for envi-ronmental impact.

EXTERNALITIESEnvironmental impact is what economists call anexternalitya cost or a benefit that is not pricedinto a transaction. Externalities can affect a thirdparty, or can apply to what are called public


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goodsthe sea, the air, forests and all the otherthings we hold in common. Externalities are thesocial and environmental costs or benefits thatare outside of the pricing equation.

In economic terms, a transaction should bene-fit all the parties involved. When you buy electric-ity from a utility, you get the benefit of the energyand the utility gets paid. Similarly, when you buywooden furniture, or a new house, you get thegoods and the producer gets the money. But if theutility operates a coal-fired power station to gen-erate the electricity it is supplying, it has effectsfar beyond the two of you involved in the transac-tion.

The carbon spewed into the atmosphere by thepower station affects everyone on the planet,since carbon is distributed globally in the atmos-phere. This impact is not included in the price youpay for the energy you consume, nor is it borne bythe utility. It is an unpriced externality. Similarly,when a logger fells a section of rainforest for tim-ber to make your furniture, or a developer bull-dozes a wetland to build your house, neither theynor you pay for the environmental impact.

Economists have put forward many solutionsfor correcting externalities, including taxes onpollution, tradable pollution quotas, regulations

OFFSETTING AS A PRICING MECHANISM...

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and improved property rights (where people havea right to clean air or water, for example). A chal-lenge with most of these solutions is how to pricethe ecological damage. What is an appropriate taxfor polluting? At what level should the penalty forexceeding a carbon quota be set?

Offsetting helps answer such questions by pro-viding an effective way to calculate the cost ofexternalities such as carbon emissions and water-shed damage.

HOW DOES PRICING BY OFFSETTINGWORK?

Offsetting calculates a price for environmentalimpact by establishing what it costs to compen-sate for that impact. If, for example, you drive amedium-sized car an average mileage for a year,you will emit, for example, six tonnes of C02. Tocompensate for that impact, you will need to plantand maitain to maturity enough trees to absorb anequal amount of carbon, or donate to a renewableenergy project that will save the emission of sixtonnes of C02 elsewhere.

Find the cost of doing these things and you willknow the price of six tonnes of carbon.


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PRICING BY PROXYProxies can be very useful when something is newor uncertain, or difficult to directly quantify. If wewant to sell our house, we could check the price ofbricks and doors and shingles, and builders andplumbers rates, and the value of land in our area,and so on, and add it all up. Or we could take alook around the neighbourhood and see whatequivalent houses are selling for, and adjust ourprice around the average to account for featuresor detractions. That is not only much quicker, butprobably more accurate in terms of what the mar-ket is willing to pay.

Bankers are always dreaming up new financialproducts, such as bonds or options that they haveto price before they sell. If something is new, thenthere will be no established price. However, it isusually possible to say that the new product, suchas a bond, is a little bit like existing bond A, a bitmore like existing bond B, and quite a lot likeexisting bond C. By aggregating the prices of prod-ucts A, B, and C in appropriate proportions, it ispossible to calculate a price for the new bond.

Carbon too can be priced according to themarket. What is the value of a tonne of carbon?Its worth what it costs to capture or displace atonne of carbon. If there are lots of easy ways to


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clean up carbon, it will be cheap. If there are not,it will be more expensive. Replanting two hun-dredt acres of cleared rainforest, or installing abiogas plant in an Indian village to replacekerosene stoves, can be a proxy for counterbal-ancing carbon emissions where they are currentlyimpossible to avoid, say in a factory making med-ical equipment in Ontario, or a wildlife organiza-tion running a fleet of Land Rovers. And since off-set schemes cost money to set up and maintain,they put a clear price on carbon. This proxy pricingof environmental impact is possibly one of themost important contributions that offsetting canmake in the long-term struggle against climatechange.

Equally as important, setting this price will putan environmental price tag on everything we do. If,for example, you drive a medium-sized car theaverage distance for a North American, youll emitabout six tonnes of C02. Right now, those sixtonnes will cost you about $80 to offset. Thats thecost to the climate of your driving habit. As moreand more businesses and individuals go carbon-neutral, that price will only go up.


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CAN EVERYTHING BE OFFSET?Some things are easier to offsetand thereforepricethan others, since there is an exact or closeequivalent. Offsetting carbon emissions can bedone fairly accurately, as long as we have enoughinformation on what is producing the C02, and thecapacity and cost of whatever mechanism is beingused as an offset.

But for some things there is no exact offset, andin this case we have to use a proxy.

Lets say we want to offset the trees used inbook production. In this case there will be no exactaccounting of the trees consumed. Here again,proxy values allow us to come up with a viablenumber to quantify our environmental responsibil-ity. A large number of trees will have been felled toproduce the pulp for the books paper. But manykinds of trees of different sizes and girths are usedin paper production, so it is not possible to sayexactly how many trees are used to create a partic-ular book. But we can make a useful estimate if wesay that it would take 100,000 x 40 foot sprucetrees, 50,000 x 30 foot firs, and 25,000 x 50 footpines to produce the amount of paper required forthe book. We know the cost of planting and main-taining these trees, so we have our proxy for thecost of offsetting.


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There may be several different proxies thatcould be used to calculate the cost of offsettingthe ecological footprint of an activity or product.Spruce trees might be more expensive than firs,which are in turn more expensive than pines, so adifferent combination of these trees could produceadequate paper for the book, at a lower cost. It isimportant when using proxies, and when applyingoffsetting in general, to choose the cheapest validmethod to ensure that the price is credible, andwill be accepted by the market.

By using real projects with fixed costs, evenwhere there is no exact equivalent and proxiesmust be used, offsetting takes the guesswork outof calculating the cost of environmental impact.Thus offsetting becomes a powerful tool for pric-ing everything from your individual ecologicalfootprint, to the real cost of new electricity gener-ating plants.

PRICING YOUR ECOLOGICALFOOTPRINTThe idea of calculating our ecological footprint isnow well established. There are numerous calcu-lators on the Internet, often looking at differentaspects of our impact on the environment, from


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our lifestyles, to the products we buy, to how muchwe travel. The aim of ecological footprinting is tocalculate how much of the Earths naturalresourcesexpressed in terms of total landareaare required to support the lives we lead.Not only does this give us an idea of the impact weare making, it also provides a way of measuringthe sustainability of our lifestyles. If we add up theecological footprint of everyone on the planet, andit comes to more land than there is available, thenclearly our present collective lifestyle isunsustainable.

If you were to divide up the Earths biologicallyproductive land and sea among its current popu-lation (about 6.5 billion), we would each getaround 1.78 hectares (4.2 acres). Biologically pro-ductive land includes farmland, pasture, forest,urban and suburban areas and land that we needto set aside to absorb carbon dioxide, while theproductive areas of the sea must be included sincea large portion of the worlds population relies onthe sea, at least in part, for their survival.

The calculation also takes into account that weshare the Earth with other speciesabout thirtymillion of themand that the biodiversity of thesecreatures and plants is essential to our survival.They require their allocation of land too. Twelve


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percent is thought to be the minimum that shouldbe set aside for other species.

There is an enormous range in the size of foot-prints of individuals across the globe. In developedcountries, people tend to have a footprint far big-ger than 1.7 hectares, while in undeveloped coun-tries with pre-industrial lifestyles, footprints aresmall. An average European, who drives a car, eatsmeat (a vegetarian diet requires less naturalresources) and does minimal recycling, has a foot-print of roughly 4.8 hectares. If everyone in theworld lived like this we would need another 2.4planets like ours to support our global consump-tion. As bad as the Europeans may be, the NorthAmerican lifestyle would require over four planets.

So calculating our ecological footprint helps usquantify our environmental impact. At this pointwe might decide to do something to reduce ourfootprint, such as recycling, driving less orinstalling solar heating. But unless we take dras-tic action, such as going back to the woods andreverting to a pre-industrial lifestyle, we willinevitably retain some footprint. Offsettingenables us to price that footprintand to mitigateit if we choose.

At the moment, offsetting schemes cover onlycertain aspects of our lifestyles, although they do


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tend to focus on those aspects with the largestimpacttransportation and energy use. There areInternet calculators that can help us calculate thecost of offsetting the emissions from air and cartravel, and home energy use, and these and otherorganizations offer opportunities to donate toschemes that offset personal carbon emissionsfrom these sources.

OFFSETTING AS A MEANS TOCOMPARE THE TRUE COST OFGOODSIn the same way that we put a price on our overallenvironmental footprint, we can also calculate thetrue cost of any product or service. By calculatingwhat it would cost to offset all the environmentalimpacts of a product (a car, a book, a can of paint),or a service (telephone, laundry, restaurant meal),we can price their environmental impact. Byadding this to the regular price, we arrive at thetrue cost of the product or service. We have fac-tored in the externalities of the transaction.

Now we can make a real comparison betweenalternatives. Say you want to buy new washingmachine. You like the look of two models thathave roughly the same specifications and price.


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By applying offsetting to their manufacture andoperation, you might find that one was designedfor energy efficiency, and was built in a factorywhere they used renewable energy and minimizedwater use and waste. It was, therefore, muchcheaper in terms of environmental impact than theother. By adding the cost of offsetting to the listprice, you would get the true price of the washingmachines and could make your choice accordingly.

The same principle could be applied to cars, orsofas, or toothbrushes. And it can be appliedequally to services. If telephone companies wereforced to offset their carbon emissions and otherenvironmental impacts, this could be factored intotheir prices, and you would know the true cost oftheir services.

Sometimes the price differential after offset-ting will be small, but it could also be very large.After offsetting, an imported sofa with a tropicalhardwood frame could be significantly moreexpensive than a locally produced product usingwood from local sustainable forests.

Offsetting can also help us make difficult deci-sions where the issues are ambiguous. Take asimple example like tomatoes. You go into asupermarket and are faced with the choice of alocally grown organic variety, an imported non-


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organic variety, or tomatoes from a workerscooperative in an impoverished area. The organictomatoes are most expensive, the imported vari-ety cheapest. Now, if you add to the cost of thetomatoes, the cost of offsetting the use of non-organic methods and transportation, you wouldknow their real cost, which includes their environ-mental cost. You might still end up choosing thetomatoes from the workers cooperative, eventhough they prove to be the most expensive,because you want to support the economic regen-eration of the area, but this would be a rationalchoice based on real prices.

Offsetting and the use of proxies should allowus to calculate the footprint of everything fromaerosol sprays to washing machines, and frombook production to house building. By pricing inthe environmental impact, we will be able to com-pare the true cost of one product with another,which will encourage us to make choices that areenvironmentally friendly and counter climatechange.

In addition, offsetting can provide a mechanismfor arriving at the true price of major projects, suchas the development of new power generationplants.


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CASE STUDY: THE COST OF DIRTYCOAL TECHNOLOGYCurrently, dirty coal-fired power generation ischeaper than new clean technologies with lowercarbon emissions because environmental impactis not factored into the price of their constructionand operation. However, if a carbon tax wereintroduced, then the economics could change dra-matically, especially since the cost of adaptingdirty power stations to capture and store carbonessential if coal-power generation is to be ulti-mately decarbonizedis much higher than fornewer clean-technology generators. But if offset-ting were applied now, then the true cost of dirtycoal technology would be immediately apparent.

Coal is plentiful and cheap, and is the fuel ofchoice for major developing nations such asIndia and China, as well as for the US and otherdeveloped countries. But coal is the most pollut-ing of all the major energy sources, not only interms of carbon emissions, but also nitrogenoxide, sulfur dioxide and mercury. Nevertheless,with no cost constraint on environmental impact,China is building the equivalent of one largecoal-fired station per week, while the US hasnearly three hundred on the drawing board.Almost all of these plan to use old-fashioned


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stored underground in depleted oil or gas fields,or salt-water aquifers.

Carbon dioxide capture and storage (CCS) isthe real secret of zero-emissions coal-powergeneration, and if the ultimate goal is to dramat-ically cut carbon emissions, which most scientistsnow agree is essential to halt global warming,then the world should be building IGCC plantswith carbon capture and storage. However, cur-rent economics discourage this. But what if weintroduce offsetting, along with the kind of risk-reward analysis that is now common in othertypes of investing?

At the moment, conventional pulverized-coalsteam plants are cheaper to build than IGCCplants. But if coal-fired power plants had to offsettheir emissions, the economics would change. It ismuch easier and more efficient to capture andstore carbon emissions with IGCC than conven-tional plants. And it is cheaper to build IGCC withCCS plants from the outset than it is to retrofitconventional plants with CCS. As the scientistsDavid Hawkins, Daniel Lashof and RobertWilliams explained in an article in Scientific

American (September 2006) on the future of coal,Installing CCS equipment as soon as possibleshould save money in the long run. Most power


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stations currently under construction will still beoperating decades from now, when it is likely thatCCS efforts will be obligatory. Retrofitting gener-ating facilities for CCS is inherently more expen-sive than deploying CCS in new plants.

You could reach the same conclusion by using amethod that organizations commonly apply toevaluate competing long-term projects. Net pres-ent value (NPV) calculates the forecasted cashflows of a project converted to their present value(by discounting the cash flows by the interestrate). In modern finance, it is common to use arisk-based approach to calculate net presentvalue. This entails outlining various economic sce-narios and performing the calculation of NPV foreach. So a number of scenarios can be postulatedwith varying demands for the electricity producedby the power plant, and varying prices the plantmay be able to charge, and also for the interestrate over the lifetime of the plant. But in any likelyscenario covering the life span of a power plant, acarbon tax will be introduced. While no one knowswhat that tax will be, it is likely to be increasinglyonerous as the world struggles to curb its carbonemissions in the face of escalating climatechange. Factoring the carbon tax into the NPV islikely to show that any upfront differential in price


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between conventional coal-fired plants withoutcarbon capture and storage and those with CSSwill be more than outweighed by cost of the taximposed on emissions at some future date.

NOT AN EXACT SCIENCEOffsetting is not an exact science, and it is still inits early stages of development. At the moment,there is considerable debate about how you calcu-late the carbon emissions of things like airplanesand the carbon absorption of trees, and what con-stitutes a valid offset. Furthermore, differentorganizations charge significantly different pricesfor offsetting a tonne of carbon based on their dif-ferent methods of operation (some are for-profit,while others are non-profit), the types of schemesthey organize, the way they calculate carbonabsorption of forests and so on.

But there is no doubt that we will get better atoffsetting. Standards will emerge. Scientists willcome to a consensus about carbon emission andabsorption rates, and other salient variables. Buteven in its present inexact state, offsetting stillprovides a good guide to the environmental costsof our behaviour and of the goods and serviceswe use.


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By putting a price on environmental impact, wewill be encouraged to change our behaviour. It willbe more expensive to use electricity from dirtycoal plants, to buy a washing machine built in apolluting factory, to sign up for a telephone serv-ice that is an inefficient energy user. Since we arepaying the true price for goods and services,including the environmental externalities, we willbe better equipped to make choices in favour ofthe Earth.


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TYPES OFOFFSETTING

The Nellore district of Andhra Prades, India, isnot inherently rich in raw materials, energy or job opportunities. Yet it does have some naturalresources that have been under used. For a start,there is the determination of the local people toimprove their lives. Then there are all kinds ofnatural waste, such as rice husks, maize stalks,mango cuttings and coconut shells, which can beburnt as fuel.

Local electricity utility SLS Power has built aplant that burns this waste to generate electricity,which is fed into the regional grid. This increasesthe energy available to the district of Nellore, butdoes not increase the carbon emissions, whichwould have occurred if SLS Power had taken theconventional route and constructed a coal-firedplant. Biomass fuel, such as rice husks and maizestalks, is carbon neutral in that burning this mate-rial only releases carbon dioxide that has recently

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been absorbed from the atmosphere, and whichwill be reabsorbed by the next crop. The process iscyclical and the energy source renewable. (Fossilfuels such as coal release stored carbon, and arenot renewable.) It is estimated that the plant willsave 17,000 tonnes of C02 emissions a year.

The Nellore biomass fuel project, a registeredClean Development Mechanism (CDM) schemeunder the Kyoto Protocol, has already createdaround five hundred jobs in the district, and isexpected to stimulate the local economy even fur-ther as the new infrastructure for the power plant,and the energy it is providing, create developmentopportunities for local businesses and industries.

Meanwhile in Western Canada, logging, unsus-tainable agriculture and urban development haveresulted in a patchwork of degraded land. In manycases, exotic species have invaded, squeezing outnative plants and animal species. The CommunityEcosystem Restoration Initiative (CERI) is a pro-gram to help local municipalities repair damagedecosystems, particularly through the planting oftrees. In addition to the local community benefits,such as shade, recreation, water source protec-tion and improved landscapes, the trees willabsorb C02 during their growing years.

Between September 2005 and the end of 2006, a

TYPES OF OFFSETTING

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CERI program initiated in the District of Maple Ridge,British Columbia, planted 25,000 trees. Starting withschools, the scheme eventually aims to plant over300,000 trees in the district. The carbon offsettingpart of the program is validated to the ISO 14064-2standard, and plantings are audited by a registeredbiologist. A cubic meter of wood stores about atonne of carbon dioxide, and a mature Sitka sprucecan weigh as much as three hundred tonnes.

Sequestering carbon in trees and replacing fos-sil fuels with biomass are just two of the manytypes of offsets now available. Other forms includerenewable energy, energy efficiency, fuel switch-ing (other than from coal to biomass), forest pro-tection or reforestation, or the reclaiming ordestruction of potent greenhouse gases such asmethane and HFC 23. The table on page 57 pro-vides examples of the technologies that can beused in various forms of offsetting.

To simplify the process of calculating offsets, allgreenhouse gases are converted to a carbon dioxideequivalent (C02e)a multiple of the global warmingpotential of the gas compared with carbon dioxide.Carbon dioxide is by far the most prevalent green-house gas in the atmosphere, and is thus used asthe reference, even though other greenhouse gasesare more potent. Methane, for example, is twenty-


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three times more harmful than C02, while sulphurhexafluoride is over 22,000 times more potent. Forconvenience, C02e has become the unit of referencein calculations for offsetting and carbon trading,while in discussion C02 or carbon are used as short-hand for greenhouse gases in general.

COMPLIANCE V. VOLUNTARYSCHEMESKyoto, through its CDM and Joint Initiative (JI)mechanisms, has given rise to a regulatory orcompliance market in offsets. In other words,companies are now buying carbon because theyhave to. CDM and JI schemes must follow strictrules, and must be registered with the UNFCCC.The cost of compliance, plus the urgent demandfor carbon credits created under Kyoto-based car-bon trading, has meant that CDM and JI schemeshave tended to be large scale, with a numberfocused on the capture of the higher potencygreenhouse gases. Kyoto rules insist that CDMand JI offsetting projects provide social and envi-ronmental benefits where they are located. Forexample, the job opportunities and stimulus to thelocal economy at Nellore were necessary for thescheme to receive UNFCCC approval.

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The voluntary market is generally focused onsmaller-scale schemes, mostly in the areas ofrenewable energy, energy efficiency and foresta-tion. Social, economic, and ecological benefits arelikely more important in voluntary schemes wherethe individual or corporate impetus to offset isoften accompanied by a more general sense ofethical responsibility. The Maple Ridge tree plant-ing program, for example, is part of a wider envi-ronmental and community initiative, although it isfunded largely by offset investments of individualsand corporations. Meanwhile, with no registrationcosts or rules, voluntary schemes are usuallycheaper and quicker to set up and get goingalthough a number of standards are emerging forthe voluntary sector that seek to ensure they pro-vide properly measured and monitored emissionsreductions (see Offsetting Standards).

Offsetting need not be limited to greenhouse gasemissions. Many human activities have environ-mental impacts that can be offset. In addition topumping out carbon, industry often pollutes ordamages the local environment, or consumesresources in non-renewable ways. Making booksuses trees, water and chemicals. The trees can beoffset by planting more; the water use and pollutioncan be offset by protecting or restoring water


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sources elsewhere. In the US, builders wanting todevelop virgin wetlands for housing or officesmust offset their impact by supporting therestoration of old wetlands previously damaged byoil production or other activity, or protect otherthreatened wetland areas.

As the urgency to reduce carbon emissionsincreases, and carbon regulations begin to bite,the need for offsetting will grow. We are likely tosee many new types of offset methods appear aspeople apply their ingenuity and creativity to theproblem of climate change.

TYPES OF OFFSETTING

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Technologiesavoidinggreenhousegases

Technologiesabsorbing/sequestering CO2

TYPE OF TECHNOLOGY EXAMPLES

- reforestation (forestation of landpreviously forested)- afforestation (forestation of land

not previously forested)- restoration

RENEWABLE ENERGY

ENERGY EFFICIENCY

BIOLOGICAL SINKS

GAS RECOVERY ANDDESTRUCTION

FUEL SWITCH

- hydro (typically less than 15MW)- biomass- wind- solar thermal- photovoltaic electricity generation

- low-energy lighting

- industrial energy efficiency

- methane recovery form landfills- destruction of HFC 23 by-product

from HFC 22 refrigerant production

- oil to natural gas- diesel to natural gas- fuel oil to natural gas- liquid petroleum gas to biomass

Source: Carbon Trust, UK


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WHY TREES?

No strategy to fight climate change and inhabitthe planet sustainably is going to work withouttaking trees into account. Deforestation is about25 percent of the climate change problemindeed, in some developing countries, deforesta-tion accounts for as much as 75 percent of green-house gas emissions. But the problem runs muchdeeper than the question of where our C02 emis-sions come from, or even where they go. Fifty per-cent of the worlds original forest cover has beencut down, and another 30 percent has been con-verted to managed forest or woodlots. Only 20percent remains intact. This is a priceless inheri-tance we cant do without.

Niger, one of the worlds poorest countries, ison the front line of the battle to stop the encroach-ment of the Sahara Desert. Situated in the centralSahel, a savannah region stretching across Africafrom Senegal in the west to Eritrea in the east,Nigers landscape was characterized by immensebaobab and gao trees rising above the grass andthorn scrub. Although these trees are highly

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adapted to the regions harsh conditions, theirnumbers were decimated by a calamitous combi-nation of circumstance in the 1970s and 80s,including harsh droughts, a population explosion,destructive farming methods and, despite theirstatus as a protected species, confusion as to whoshould be taking care of them.

Then UN-funded studies bore out local folkwisdom that gao trees in particular were thefarmers best friend. The gao, a member of theacacia genus ( Acacia albida ) that grows up to thirtymeters tall, has the unique characteristic of losingits leaves in the rainy season when everything elseis trying to grow. So while the leafless trees pro-vide a welcome degree of dappled shade for cropsin the growing period, they do not compete forwater, nutrients or sunlight. The tree releafs inthe long dry season, increasing its shade coverand protecting the soil.

Instead of clearing the self-seeded saplingsfrom their fields, farmers were encouraged to letthem grow. The Nigerian government changed thelaw to allow the farmers to own the trees, givingthem added incentive to nurture and protect them.Slowly, the trees grew back, and with them aridfields became productive once more, and theregion began to regenerate.

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provide flowers and fruit and nuts and timber, thatare home to insects and birds and climbing crea-tures, that shield the wind and prevent floods orare useful in a multiplicity of other ways.Everywhere, trees are essential to sustainablelocal economies and the wider environment. Thisapplies as much to urban areas as to farmlandand wild spaces.

VANCOUVER RECLAIMS ITS CANOPYThe city of Vancouver, Washington, recently quan-tified the benefits of its trees, and is trying to turnthe tide on their destruction within its environs. In2003, the city measured its tree canopy cover at just 19.7 percentless than half of what it wasthirty years previously. This was bad news for thetrees, and bad news for the city. A study from theUniversity of Washington showed that shoppers indowntown business districts that have a multitudeof large, well-maintained trees are willing to paymore for parking, stay longer in shops, have a bet-ter perception of the quality of merchandise andwill even pay 9 to 12 percent more for the goodsand services they find there. Another study, fromthe Center for Urban Forest Research in Davis,California, revealed that the Pacific Northwest of

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the US gains at least $2.50 in benefits for every $1spent on tree planting and maintenance. Amongthe benefits of urban trees are a reduction inambient noise levels by up to a half, a reduction ofenergy bills by as much as 40 percent if the treesare properly sited, an increase in property valuesby between 3 and 6 percent, and the creation of anappealing environment, which helps with businessrecruitment and relocation. No wonder Vancouverhas embarked on a program to restore its canopyto at least 28 percent.

Beyond Vancouvers city limits, trees have beendiscovered to play a critical role in the breedingcycle of salmon, and the health of the adjoiningocean ecosystems. Ecologists studying fish stocksin the Pacific Northwest found that the shade pro-vided by trees on riverbanks helps regulate thetemperature of spawning grounds, while fallenvegetation creates shelter for incubating embryosand young fish. But this is a two-way processtheadult salmon in turn help feed the forests. Bearsfishing in coastal streams and rivers drag thesalmon up to one hundred meters into the trees,where they often eat only part of the fish, leavingthe carcass for other animals and insects.Together, these creatures help distribute this richsource of nitrogen throughout the forest. This


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it provides. In addition, it offers numerous educa-tional facilities, such as woodland classrooms andcourses and lectures by its staff. It also producessome timber. In fact, the Forestry Commissionwas set up at the time of World War I to create andprotect a strategic wood resource for the nation. Itwas only after hostilities ended that theCommission turned its attention to catering forthe countrys leisure needs. This is an importantrolethe peace and tranquility of the woods, theclean air, the outdoor opportunities for exerciseare all essential for the nations health. With thelooming threat of climate change, the ForestryCommission is once again taking on a strategicfunction.

Forest Research, the research agency of theForestry Commission, has been charged withlooking at how the countrys woodlands andforests are likely to be affected by global warming,and what can be done to help them adapt. Theagency is also looking at the role trees can play inclimate change mitigation. For example, it hasprograms in Scotland and Wales to promote woodas an alternative to fossil fuels. Since the carbonin wood fuel harvested from a managed forest isoffset by that captured by the growing trees, burn-ing wood can be carbon neutral. Forest Researchs


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studies have shown that, taking all environmentalimpacts into account, sustainably produced woodis comparable to wind or solar panels as a renew-able energy source. There is similar researchunder way into the use of timber as a renewablebuilding material.

Although the Forestry Commission does notplant trees specifically for offsetting, it recognizestheir role in sequestering carbon, and ForestResearch is currently studying the carbon cycle ofwoodlands. (The agency is also pursuing researchthat shows that at least some types of forest soilsact as carbon sinks.)

The Commission offers advice on how tochoose valid schemes to those who want to volun-tarily offset, and the best species to use if theywant to plant for themselves.

The Forest Research scientists advice isadamant: you should never plant for a single pur-pose, be it carbon offsetting, timber, recreation orsome other purpose. They emphasize the multiplebenefits of trees, including their role in preventingsoil erosion, alleviating floods, protecting biodi-versity, and purifying water. They also say youshould never just plant one species, but rather amix that is appropriate to the particular environ-ment, if only for the fact that we are unsure which

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species will best survive climate change.

WHY DO SOME ENVIRONMENTALISTSCONDEMN TREES?Trees provide a host of benefits. They are essentialto ecosystems and economies. They provide food,shelter, medicine, materials and relaxation.Meanwhile, the Earths forests continue to bedestroyed at an alarming rate. Each day, an areaof forest twice the size of Paris disappears. Whileoffsetting projects aim to stem the tide of thisdestruction, and to increase the numbers of thesemagnificent and generous plants, tree and forest-based offsetting have been the target of wide-spread criticism and condemnationsome of itfrom unlikely sources.

A leading British environmental activist andthinker had this to say about forest-based offset-ting: When you drain or clear the soil to planttrees, for example, you are likely to release somecarbon, but it is hard to tell how much. Plantingtrees in one place might stunt trees elsewhere, asthey could dry up a river which was feeding a for-est downstream. Or by protecting your forestagainst loggers, you might be driving them intoanother forest. As global temperatures rise, trees


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offset funding. Of course forests face risks, butforests also regenerate, and can re-absorb C02 lostto fire or disease.

It is possible that some environmental groupsobjections to forestation and conservation offsetshave been exaggerated. Friends of the Earth,Greenpeace and WWF all have forestation andconservation programs that are at odds with the joint statement above (made in a 2006 pressrelease discouraging offsetting). Friends of theEarth, for example, in its US national forests cam-paign, says, Americas 155 national forests, whenmanaged properly, are essential to healthyecosystems that clean drinking water and purifyour air. They provide great recreational opportuni-ties for people looking to get away from the hustleand bustle of development in their own communi-ties. What makes a forest protected or planted byan offset scheme a menace, and those outside ofoffsetting a blessing? The key to Friends of theEarths statement is the phrase when managedproperly. Offset schemes, must be managedproperly, as must national forests.

At the same time, the most publicized objectionto forestation came from a report by the scientistsKen Caldeira and Govindasamy Bala. The studyfound that trees in northern climates may actually


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contribute to global warming, since their darkgreen canopies absorb more sunlight than thewhite surface of the snow. Almost immediately,people who would never think to identify their ownbehaviour as part of the problem started pointingfingers at the trees, and more than one personspeculated that razing the forests might be a solu-tion to global warming.

This bizarre proposal ignores the fact that theboreal forests store billions of tonnes of C02,which would be released if the trees were felled.This should be enough to dismiss the idea. But thestudys own authors have an even better one.Preservation of ecosystems is a primary goal ofpreventing global warming, said Dr. Caldeira.And the destruction of ecosystems to preventglobal warming would be a counterproductive andperverse strategy.

Dr. Bala added: Apart from their role in alter-ing the planets climate, forests are valuable inmany other aspects. Forests provide natural habi-tat to plants and animals, preserve the biodiver-sity, produce economically valuable timber andfirewood, protect watersheds and indirectly pre-vent ocean acidification.

WHY TREES?

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THE PLANETS OWN REPAIR KITIt seems absurd to have to defend trees whenalmost every culture through the ages has its say-ings, poetry and other art extolling the virtues oftrees, their role in the web of life and their rela-tionship with man. From a fallen tree, all makekindling, is an old Spanish proverb. In Guinea,they salute the biodiversity protected by trees withthe saying, Around a flowering tree, one findsmany insects, while the Greeks capture a deepwisdom in their maxim, A society grows greatwhen old men plant trees whose shade they knowthey shall never sit in.

The Victorian poet, artist and critic John Ruskinperhaps said it best when he wrote, Being thusprepared for us in all ways, and made beautiful,and good for food, and for building, and for instru-ments of our hands, this race of plants, deservingboundless affection and admiration from us,becomes, in proportion to their obtaining it, anearly perfect test of our being in right temper ofmind and way of life; so that no one can be farwrong in either who loves trees enough, andeveryone is assuredly wrong in both who doesnot love them, if his life has brought them in hisway. Insofar as avoided deforestation and refor-estation are done sensitively, with attention to


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choosing the most appropriate species, andmeeting the needs of local people, and are wellmanaged and secureas many tree-based offset-ting schemes arethey will sequester carbon and give generously of their many other of benefits.

As Pulitzer Prize-winning science authorJonathan Weiner writes in his book on globalwarming The Next One Hundred Years: As aninstrument of planetary home repair, it is hard toimagine anything as safe as a tree.

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THE SCIENCE ANDMEASUREMENTOF OFFSETTING

While doing research in geochemistry at theCalifornia Institute of Technology in the 1950s,Charles Keeling invented an instrument that couldmeasure carbon dioxide in atmospheric samples.He took it with him when he moved to the ScrippsInstitution of Oceanography, where its directorRoger Revelle was investigating how much C02was absorbed by the oceans. In 1958, Keeling wasgiven the task of finding out exactly how much ofthe gas was present in the atmosphere, so he tookhis invention to the observatory on top of MountMuana Loa in Hawaii to get readings untainted bylocal human activity.

What Keeling discovered was a revelation. Overthe course of a year, the concentration fluctuatedby a full 3 percent as the local vegetation breathedin C02 during its spring and summer growing sea-son, and exhaled during autumn and winter as

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leaves fell and decomposed. But it was what theinstrument registered about the overall concen-tration of C02 in the atmosphere year-on-year thatreally startled. As Keeling plotted his results on agraph the inexorable upward trajectory of C02became clear.

Looking back I see that graph as the SilentSpring [Rachel Carsons 1962 book that launchedthe environmental movement] of climate change,for one need do nothing more than trace its trajec-tory forward in time to realise that the twenty-firstcentury would see a doubling of C02 in theatmospherefrom three parts per 10,000 thatexisted in the early twentieth century to six. Andthat has the potential to heat our planet by around3C, and perhaps as much as 6C, said TimFlannery in his book on climate change, TheWeather Makers.

Accurate measurement of C02 and othergreenhouse gases underpins the science of cli-mate change, and is equally essential for effectiveoffsetting. Instruments and methods are continu-ally evolving, and scientists have since ranged farbeyond the mountains of Hawaii to monitor green-house gas levels and their impacts.

One such effort is CarboEuropea five-year,European Union-funded project to study the carbon

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cycle across Europe. Begun in 2004, the projectinvolves sixty-one research centers in seventeenstates measuring the patterns of carbon releaseand absorption, and investigating the mecha-nisms that affect this process. One of its goals isto detect changes in atmospheric C02 concentra-tions and ecosystem carbon stocks as Europestrives to meet its targets set by the KyotoProtocol. Early results suggest that the Europeancountryside and its vegetation act as an importantcarbon sponge, soaking up around 12 percent ofman-made emissions.

Greenhouse gases are invisible as they accu-mulate in the atmosphere around us. Meanwhile,offset projects aim to reduce or prevent theiremission altogether. The whole process deals withsomething that is either difficult to perceive or,ideally, non-existent. Add to this the fact thatmany offsetting projects are in far-off places andcan extend over many years, and the issues of sci-entific understanding, accurate measurement andreliable monitoring become acute.

They say you get what you pay for, but in thecase of offsetting, you pay for what you dont geti.e. carbon emissions. One of the biggest hurdlesfaced by the voluntary offsets movement is thatthose who participate never perceive what theyre


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the fruits of their investment. The widespreadadoption of offsetting will depend on reassuringpeople that theyre not paying for magic beans.This means being able to show confidently boththat we know how much C02 is being emitted by,say, a factory or a family car, and that we canmeasure the amount of C02 our offsetting pro-gram is cleaning up.

So how do we do this? Lets start with moregeneral measurement, and work our way towardsomething as specific as a single car. Offsettingtakes place against a background of intense sci-entific research into climate changegreenhousegas emissions, and their measurement and miti-gation. There are well established methods forestimating or measuring emissions, both on alarge scale, at the national and global level, and ata smaller scale, for individual factories, processesand products.

The Intergovernmental Panel on ClimateChange (IPCC) provides guidelines and method-ologies to help countries calculate their green-house gas emissions. It does this by sectorenergy, agriculture, industrial processes, and soonand provides formulas for each gas. It distin-guishes between those that can be done accu-rately at an aggregated level, and those that

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require detailed information and measurement onthe specifics of the emissions. With energy pro-duction, for example, the IPCC shows how C02emissions from fuel combustion can be simplycalculated based on the carbon content of the fuelused. On the other hand, emissions such asmethane and nitrous oxide require detailed knowl-edge of combustion conditions, technology, fuelcharacteristics, and other factors.

The more technical the process or product, theeasier it is to be accurate in measuring emissions.It is easier to fit a carbon-monitoring device to afactory chimney than to a forest, and to a car thanto a cow. Similarly, if a controlled chemicalprocess is involved, such as the production ofcement or fertilizers, Greenhouse gases (GHGs)can be calculated using chemical formulas anddata on the quantities of elements or compoundsused. In other words, if you use so much naturalgas to make a unit of fertilizer, you can figure outwith a pencil and a calculator how much C02 isgoing to be emitted.

So far, so good. Problems arise, however, withtechnical processes or products when there isaggregation or generalization. For example, ifyou want to offset your car, you need to know howmuch C02 you emit. But how do you figure that


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