Is carbon offsetting worth it?

The term carbon offsetting is the undisputed buzz phrase of the day. The principle is simple: you pay a given amount for every carbon emission for which you are responsible and the money helps cancel this out by funding a project that reduces carbon emissions.

Over the past couple of years, carbon offsetting has really taken root. In a recent survey, research agency Ciao found that 73% of the British public said they would be willing to pay £5 to offset carbon emissions for a short-haul flight and £15 for long-haul.

Whether driven by guilt, fear of a damaged reputation or a genuine desire to change the world, both corporate organisations and consumers alike have no objection to putting their hands in their pockets when it comes to the issue of climate change.

This is great news for the growing numbers of carbon-offset providers. The role of these companies is to add up the carbon you have spent for a particular event, in terms of either tonnes of CO2 or carbon credits. They then calculate how much it will cost to effectively buy this carbon back. Your money is then put towards a carbon-reducing project in another area of the world - a renewable energy plant in Mexico or a project in the North Pole to combat the melting ice caps, for example.

Choose your project

Some carbon-offset providers, such as Carbon Footprint, allow you to choose which project you would like your contribution to fund, including its forthcoming conversion of hotels in India to total energy-efficiency. Other providers, such as Climate Care, pool all contributions and distribute the funds across its entire portfolio.

But many environmentalists are looking at carbon offsetting with an increasingly critical eye. As the industry is still in its relative infancy, there's no regulation in place, and it's not even known how many carbon-offset providers exist, although it's likely that there are between 20 and 25.

What's more, as companies are not working to set criteria, the value of a carbon credit can vary between providers. For example, Climate Care works on the basis of a £7.50 charge for every tonne of CO2 produced. "This reflects the cost of running the business and the cost of buying back the tonne of carbon offset," explains business development manager, Nicola Schofield. So if you wanted to offset the 2.1 tonnes of CO2 Climate Care calculates is generated by driving 8,000 miles a year in a car with a fuel economy of 40 miles per gallon you would have to pay £15.75.

But, using the same criteria, puts the carbon emission at 2.2 tonnes and says it would cost £25.96 to offset - that's £12.25 per tonne. Meanwhile, PURE (the only registered charity in the carbon offsetting field) puts the carbon emissions at 2.6 tonnes and says it would cost £36.40 to offset, which equates to £14 per tonne.

Code of conduct

However, there may be light at the end of the green tunnel. Earlier this year, the Department of Environment, Food and Rural Affairs (Defra) proposed that a voluntary code of conduct should be introduced for any company claiming to offset your carbon crimes. Environment secretary David Miliband says that this is because consumers need reassurance that when they offset their emissions their money is spent on projects that carry genuine CO2 reductions. "The Government's standard and code of practice will carry a quality mark, so that people can easily check before they choose a provider," he explains.

Only four existing schemes currently meet the government's initial criteria for the voluntary standard. These are run by PURE, Global Cool, Equiclimate and Carbon Offsets. However, it may be a little premature to say these schemes are Government-approved; the code of practice is still in its consultation phase, although a Defra spokesperson says it should be finalised by the end of 2007.

This doesn't necessarily mean consumers will have to wait until 2008 to offset their carbon spend safely, though. Many offset providers welcome the prospect of a voluntary kite mark, but say that in the meantime they are operating in a transparent, above-board manner. Climate Care, for example, engages a third party at the start of each project to write a report on its existing emissions, which it compares with emissions when the project is finished. A separate team of environmental specialists is recruited to monitor the emission reductions made during the course of the project. The company also publishes an annual report to show how the funds have been distributed.

Meanwhile, Carbon Footprint asks household names to endorse its projects. Its tree-planting project in Kenya's Rift Valley, for example, is supported by Esconet, a local conservationist network backed by the Red Cross. The offset provider also employs an independent auditor to oversee its projects.

In the meantime, Mike Rigby, managing director of carbon offset provider CO2 Balance, advises consumers to ask their carbon-offset provider key questions before parting with any cash. The first is will your contribution lead to new project activity? "Projects that are up and running already are unlikely to shut down and don't need more money thrown at them," he says.

Then, you should ask what percentage of the project comes from carbon-offset funding? According to Rigby, it should be at least 50%. "If it's 3%, you can bet the additional funding could have come from a bank."

Similarly, the bottom fell out of a project that delivered thousands of energy-efficient light bulbs to a village in South Africa, says Phil Wolski, head of fundraising at PURE. "A week afterwards, the local government delivered the same light bulbs to the same place, so it was a waste of time and money."

Wolski also says that even Certified Emission Reduction schemes, which usually operate on an industrial scale and are backed by the UN, can falter due to bad planning. He claims the only way you can really ensure your money is well spent is to use a provider like PURE that will hold the funds until the level of carbon offset is confirmed.


But is carbon offsetting really a satisfactory way of halting climate change, however earnest the offset facilitators or worthy the schemes?

Rather than offsetting our carbon crimes, environmentalists say the world would be a better place if we simply didn't commit these offences in the first place. Instead of paying to rectify the damage once it's done, we should take steps to reduce our own carbon footprints. The Government-funded Carbon Trust believes that carbon offsetting should be seen as the "final step within a robust carbon management strategy".

And, if the Institute of Public Policy Research (IPPR) has its way we will soon have some conspicuous reminders of the environmental costs of air travel. It has recommended that the Government introduce cigarette-style health warnings at airports and on all advertising for air travel and package holidays. Simon Retallack, head of climate change at IPPR, says: "The evidence that aviation damages the atmosphere is just as clear as the evidence that smoking kills."

Your carbon footprint

There has never been a greater focus on global warming and green issues- it's dominated the G8 summit, everywhere you look companies are presenting their green credentials.

New investment opportunities are being positioned from an angle of social responsibility.

We'd like to know what you think about this - is it going to be the dominant issue affecting the investment markets for years to come or is it a bandwagon on which people are hitching a ride that will inevitably run out of steam?

We want to gain a better understanding of your view on the green debate.

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