Don't offset; Retire

By Jane Burston, Carbon Retirement

Carbon offsetting is an unusual industry. The purpose of it is to reduce carbon emissions, but its strongest critics are climate change activists who usually focus on airlines and oil companies. The critics fall into two camps – those who believe offsetting fools you into thinking it's OK to carry on polluting, and those who think offsetting services don't work properly.

The first of these issues is a type of moral hazard, where the buyer of the carbon offsets does not take responsibility for their actions. A lot of organisations have been accused of 'greenwash' because they have bought offsets to be 'carbon neutral', but don't seem to have reduced their own emissions as much as possible.

In our experience, this type of criticism is a knee-jerk reaction. People who spend money on carbon offsets care about climate change. In fact, all our customers are considered and passionate, which is why they are prepared to accept a financial cost for their carbon footprint.

The second issue is a more technical concern about the projects behind the carbon offsetting services.

When you buy a traditional carbon offset, some of your money ends up funding a project. It might be a forest in South America, or a hydroelectric dam in Asia. The project reduces emissions, compensating for your own carbon footprint.

However, over the past few years a steady stream of media reports and academic research has uncovered quite serious failings in this process. Some of the projects don't deliver; others are ambiguous in terms of who the environmental benefit 'belongs' to.

Little of the money spent on project offsets goes to sustainable development. Carbon Retirement's own research, validated by the UN Environment Programme and published by the BBC, shows that the process is so complex that only 28p in every £1 spent on offsetting is actually spent on the project the buyer intended the money to fund.

Consequently many potential buyers don't trust that their money will make a difference.

Despite this scepticism, huge innovation is underway as the market searches for more robust approaches.

Our service (www.carbonretirement.com), which is one of these innovations, directly reduces the amount of carbon dioxide that industry in Europe is allowed to emit by working through formal European climate change legislation.

We buy up pollution allowances directly from a cap-and-trade scheme – and then permanently remove ('retire') them from the scheme so that they can't be used by the industrial companies that need them. Instead, those industrial companies have to reduce their emissions.

This method of offsetting has received endorsements from all corners: environmentalists, policymakers and big businesses alike. Bill Clinton's former environment and energy secretary, Joseph Romm, said we was “delighted” by the idea; Co-oportunity author and green-marketing guru John Grant said it “might just be the world's first truly ethical offsetting scheme.”

The approach is being taken up by an increasing number of leading companies and organisations, from FTSE 100 private equity firm 3i, to the Church of England, to the UK's Committee on Climate Change, a body of the top UK economists and climate change scientists which advises the government on carbon budgets.

Carbon offsetting is sometimes presented as a distraction. But as we realise the scale of the challenge ahead of us all, offsetting will prove vital as a tool for driving emission reductions where direct changes in behaviour are not possible.

The services on offer will undergo some wholesale changes as the innovations underway take root. We can expect a fairly rapid transition to an industry that is bigger, more serious, and more robust against the criticism it currently receives.