Buy an airline ticket online, and you’re increasingly likely to see this pitch: Add a payment of a few dollars and finance save-the-Earth activities to offset environmental damage caused by your trip.
Travel companies such as British Airways and travel sites Travelocity and Expedia are giving ticket purchasers the chance to at least assuage guilt, and possibly help the planet, by selling so-called offsets to finance green activism. Cost: About $5 and up.
The travel companies pass along the money to a new breed of enterprises –some for-profit, some not –that invest in wind farms, solar energy, energy-efficiency technology or other green projects. They go by names such as Native Energy, Carbon Fund or TerraPass. But for all the good feelings that bubble up for the traveler who makes the donation, controversy nags about their effectiveness and the accountability of some of the enterprises taking money.
Electrical engineer Ron Goltsch, of West Caldwell, N.J., says he looked into TerraPass because he’d been getting teased about how his frequent, worldwide travels contribute to global warming. He scrapped the idea when he learned from its Web site that it’s in business to make money.
“I have a lot of doubts when some for-profit business needs my cash to save the world,” he says. “What I want to know is how much of my $29.95 is going towards saving the planet, and how much is lining corporate pockets.”
Because the industry is not regulated in the United States, the companies and organizations taking payments from consumers approach the task of cleaning up the environment in widely divergent ways.
“There’s no widely accepted certification for offsetters. No ‘seal of approval,'” says Michael Gillenwater, a Princeton University climate policy researcher. “No one knows what to trust.”
For example, for-profit TerraPass, which has a deal with Expedia, declines to disclose its finances, including its profit, citing competition. By contrast, Travelocity funnels travelers’money to The Conservation Fund, a nonprofit that merits the American Institute of Philanthropy’s highest grade for accountability and performance.
Critics in the environmental movement also fear that selling offsets may divert public attention from what they view as a more effective remedy: stricter laws.
“On an issue like climate change, where real regulation and government action are probably necessary, you don’t want offsets to distract from the importance of that task,” says Billy Pizer, an economist with Resources for the Future, an environmental think tank.
Supporters, however, say by selling offsets, they’re raising awareness of global warming as well as financing green projects that otherwise couldn’t compete.
The availability of carbon offsets helps companies and individuals understand the impact of their actions before laws limit their carbon-emitting activities, says London-based consultant Abyd Karmali of ICF International, who recently authored a 60-page report on offsets that predicts explosive growth.
“It’s allowed them to understand what the economics of reducing emissions is, so it’s put a cost on carbon,” Karmali says. “No one’s trying to pretend that we don’t need regulation that would eventually force us to shift personal and corporate behavior.”
Carbon Fund founder Eric Carlson, a nonprofit offset provider in Silver Spring, Md., contributed 93 percent of the nearly $800,000 raised in 2006 to 27 green projects. Typical of the projects is the South Dakota Wind Energy Center near Highmore, the state’s largest wind farm. It’s owned and managed by Florida Power & Light, and recipient of $3,200 from Carbon Fund last year. The money that goes to Highmore subsidizes wind energy to make it more competitively priced against carbon-generating coal power, Carlson says.
Paying the piper
The practice of paying to offset carbon dioxide has been growing rapidly, and it isn’t limited to travel. Last year, individuals and companies worldwide bought $110 million worth of voluntary offsets, versus $6 million worth in 2004, Karmali says. Individuals offset car use and energy usage at home. Corporations offset employee travel, important meetings and electricity consumption. It has grown downright trendy.
Popular rock acts such as Coldplay, Barenaked Ladies and Bon Jovi have paid for carbon offsets to mitigate the effects of their international tours. Former Vice President Gore buys offsets while touring for his Academy Award-winning global warming documentary, “An Inconvenient Truth.”
Travelers and consumers in Europe have been tuned in to the concept of offsets longer than their American counterparts, and the U.K. government in January announced plans to regulate the industry.
Among the basic issues on which the developing carbon offset industry can’t find consensus:
“¢ Effective projects. Planting trees is a popular but controversial way to trap carbon. Effectiveness depends on a forest’s age, growth rate, local climate conditions and nearby land use decisions, says a recent report by Tufts University’s Climate Initiative. The impact can be short-lived if fire, disease or humans destroys the trees.
Coldplay discovered the risks the hard way. Many of the 10,000 mango tree saplings financed by Coldplay fans and planted in India four years ago withered due to neglect.
“¢ Accountability. Many offset companies pay outside firms to verify their work. But a report by environmental consultant Mark Trexler, commissioned by New Hampshire-based Cool Air-Clean Planet, said the lack of clear industry standards makes outside verification unreliable.
Even with third-party certification, it’s not always clear, for instance, how an offset project’s performance is tracked or whether the same carbon offset is sold multiple times, the report says.
“There is a real potential for backlash if people come to the conclusion that this isn’t an environmentally credible approach,” says Trexler.
“¢ Role of profits. For-profit offset companies generally devote a smaller share of donations to green projects, the Tufts report says.
It says for-profit companies Carbon Neutral and Clean Air Pass directed 15 percent to 30 percent of sales to projects, versus 93 percent for nonprofit Carbon Fund. Whether that matters is debatable. High overhead could mean a company is extra picky in choosing where to invest money, says Tufts report author Anja Kollmuss.
– Pricing. Prices for offsetting carbon-producing activities vary widely. For example, to offset emissions for a round-trip Boston-Washington, D.C., flight, you pay $18.40 at Carbon Neutral or $1.31 at Carbon Fund, the Tufts report says.
Emissions calculators for each reached different conclusions about trip distance and emissions generated. The organizations also charge between $5 and $30 to offset one ton of carbon, reflecting differences in business models and projects selected for investment.
Options for payment
Larry Coury, 44, of Brooklyn, N.Y., saw the carbon offset option for travel when buying a flight and hotel package on Travelocity.
With a click, Coury added a tax-deductible $10 to his airfare of around $200 for his trip to Huntington, W.Va. The amount is based on one person’s share of average carbon-dioxide emissions for a short trip. Travelocity, which added the option in August, passes all the contribution to The Conservation Fund of Arlington, Va., a top-rated charity for its accountability. Travelocity wouldn’t disclose how much it has collected so far.
Coury says he briefly wondered where his money would go, but dismissed the thought.
“It was not enough money to think, ‘Who knows what they’re doing with it?'” says Coury, a patent lawyer. “They’re just funneling the money to an environmental group. I just shrugged my shoulders.”
The Conservation Fund keeps 4 percent of every Travelocity dollar for overhead and fundraising, and sends the rest to the U.S. Fish and Wildlife Service to spend at Bogue Chitto National Wildlife Refuge near New Orleans.
Doug Hunt, a U.S. Park Service ranger at the refuge, calls the investment “good for everybody.”Travelocity money so far has financed the buying and planting of 4,000 cypress and oak saplings.
Within hours last summer of Travelocity’s move to add the carbon option, rival Expedia launched a similar option with a different beneficiary: TerraPass, one of many for-profit companies selling carbon offsets.
TerraPass’s contributors grew to about 40,000 last month up from 2,500 a year earlier, says Tom Arnold, who helped found the company during a six-week MBA class at the Wharton business school at the University of Pennsylvania. He earned his MBA from Wharton in 2005.
Arnold, who moved the company to San Francisco to “chase the hot California market,” credits Expedia with about a third of the company’s growth.
When a traveler buys a $6 voucher on Expedia – designed to cover emissions from a 2,200-mile flight – TerraPass commits to offsetting 1,000 pounds of carbon emissions within 90 days of purchase. TerraPass offsets emissions by buying so-called carbon credits, or green financial instruments. The hope is that TerraPass will make a profit by paying less for the credits than what customers paid. The carbon credits work this way: One credit equals the reduction of one ton of carbon dioxide saved from being emitted into the atmosphere by a green activity. A windmill farm, for instance, creates credits by displacing energy that would otherwise be generated by a coal-fired plant.
The concept grew out of the Kyoto Protocol, the global warming treaty that requires countries to reduce greenhouse gas emissions partly through the buying and selling of carbon credits.
TerraPass buys some carbon credits from small sources, such as a family owned farm near Princeton, Minn., that converts cow manure into electricity and sells credits on a volume basis. It buys the bulk of credits on the Chicago Climate Exchange, a three-year-old voluntary exchange that lets 170 members buy and sell carbon credits. Members such as Ford, Motorola and IBM can sell credits once they’ve proved that they polluted less than an agreed-upon baseline – or buy credits if they’ve polluted more than that baseline.
“It’s a retail model like the Gap,” Arnold says of TerraPass’s model. “They make jeans for less than $50 and sell them for $50.”
Tom Stoddard CEO of for-profit Native Energy, acknowledges that some consumers worry about “for profit,” but says profits motivate entrepreneurs and investors. “If doing something good for the environment is the exclusive province of non-profits,” he asks, “how many wind turbines will be built?”
By Barbara De Lollis
18 March 2007
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