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Don’t Offset Your CO2 Emissions, Retire Them

By Joe Romm  

"Don’t Offset Your CO2 Emissions, Retire Them"

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logo.gifCarbon Retirement — you read it here first (or maybe second).

I don’t normally endorse individual companies. But I have long thought European allowances were the best alternative to offsests and am delighted someone has made a business out of it.

The business opportunity is clear — offsets suck. At a policy level, they can destroy the environmental value of climate legislation (see “Boxer bill update: Probably no U.S. CO2 emissions cut until after 2025” and “McCain speech, Part 2: Relying on offsets = Rearranging deck chairs on the Titanic“).

At a personal level, lots of vendors are selling very dubious offsets, including CCX (see here and here and here). I can’t imagine why you would waste your money on the most popular offsets, trees (see no trees and certainly not a Northern forest — heck, even offset seller Terrapass disses trees). And don’t get Climate Progress started on the other popular offset, RECs (see “Schendler Part II: Good RECs vs. Bad RECs“).

But I know some of you out there really want to be carbon neutral, and while you have bought 100% renewable power for your superefficient home that uses a geothermal heating and cooling system to replace natural gas, and you bought a Prius for the family car and you telecommute, you just haven’t figured out how to avoid some driving and flying.

What to do? Buy real emissions credits from the European market and retire them permanently! Now that is the best idea since solar baseload.

Here is an article on Carbon Retirement, which launched on July 15. Now obviously European allowances are much more expensive than offsets — but that is the whole point. Offsets are like junk bonds or perhaps more appropriately subprime loans. European allowances are the real deal.

Yes, I know you are concerned that Phase 1 of the European emissions trading scheme didn’t go well. But in fact, it really didn’t go that badly (see “Lehman on the European Union Emissions Trading Scheme“). But in any case, Phase 1 was pre-2008 and thus was a trading scheme without a hard emissions cap, which is like a peanut butter and jelly sandwich without the bread — a mess.

As Carbon Retirement explains:

The price of Phase 1 EUAs dropped when analysts realised in spring 2006 that European governments had allocated so many allowances that the regulated industries did not have to make reductions. This was because the allocation plans were based on estimates of emissions, rather than audited measurements.

The allocation plans behind Phase 2 are based on extensive and credible measurement of the industries’ emissions, and the industries within the scheme will have to make emission reductions. This is why the price of Phase 2 credits remained strong when the Phase 1 credits collapsed. Independent analysts have recently assessed the allocation for Phase 2 and forecast that credits will be scarce.

Actually, their entire website is incredibly informative and explains why buying and retiring European allowances is infinitely superior to wasting your money on buying offests:

Here are all their FAQs:

Kudos to Dan Lewer, who founded this company at the age of 25.

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14 Responses to Don’t Offset Your CO2 Emissions, Retire Them

  1. Albert says:

    Where does the money you pay for these “retirements” go? I prefer to take the money I would use for offsets and invest it in clean energy stocks.

  2. John Hollenberg says:

    This looks like an excellent choice, assuming the company has some means of verification that the emissions credits were actually purchased, and a way of assuring us that they will be permanently retired.

  3. Daniel Haran says:

    John – all we have to go by is their promise, stated here: http://www.carbonretirement.com/pages/retiring_credits

    That’s good enough for me: I just spent £26.78 to retire a ton. I’d like to be ‘carbon-neutral’ and to me this seems like a sensible part of a balanced strategy.

    (Techie thought: It would be neat to have a notification system that lets you know whenever the price of a ton has gone down to a preset level. Anyone else think that would be neat?)

  4. Ben says:

    like a peanut butter and jelly sandwich without the bread — a mess.

    Good one.

  5. Paul K says:

    I submit that if offsets are narrowly defined to what actually produces usable carbon free energy, they would be the ideal currency in a designed market. Ideally, there would also be a way to include efficiencies, but I think it probably would be overly complex.

  6. Looks like you can buy US or Canadian carbon credits to retire instead of compensate soon too:

    http://www.enn.com/lifestyle/article/37742

    Australia also has plans for a cap-and-trade system. As long as those systems aren’t interlinked, companies like Carbon Retirement can profit from price differences between the systems to find the cheapest carbon credits to retire. He, that’s arbitrage, where are the big banks and hedge funds? ;-)

  7. Greg says:

    From the FAQ: “All reductions are made within the European Union.”

    Personally I think one of the most important issues to solve is getting clean technology into the developing world. When audited correctly carbon offsetting gives an incentive to these countries to reduce emissions, even when they don’t have an emissions cap. This scheme doesn’t seem to address this issue.

    Secondly – Maybe this claim is wrong anyways? I thought that European companies were able to buy offsets from CDM and JI projects.

  8. John Hollenberg says:

    Some thoughts on why “Carbon Retirement” may not be such a good idea:

    http://commontragedies.wordpress.com/2008/07/16/on-early-retirement/

    The author states that “gaming the system” in this way may end up leading to changes in the cap (if the amount of retired EUA is significant). He makes a valid point.

  9. Jonas says:

    First I want my money back from the EU. The first phase stole billions upon billions from us.

    The system is the biggest environmental accounting fraud in the history of mankind.

    Nobody guarantees that the second phase is any better. In fact, massive evidence of mis-allocations is already emerging (check the infamous Arcelor Mittal case in Wallonia).

    So Carbon Retirement takes away allowances of which there are too many. And taking them out of the system forces the EU to hand out more in a next round, or it forces energy companies to charge consumers extra.

    The Carbon Retirement concept is entirely flawed. It punishes all European consumers, while the polluting companies participating in the ETS should be the ones to carry the burden.

    Sorry, but I hope your view on “solar baseload” is more realistic than your enthusiasm for this fake carbon offsetting idea.

  10. Joe says:

    Sorry, Jonas — You are living in the past. And you might try reading the Lehman Brothers report. There is no perfect trading system, but now there is a hard cap, so I am less worried about things.

    In any case, this is only for people who like offsets, which I don’t. But This is certainly not a “ake carbon offsetting idea.”

  11. tidal says:

    This firm http://www.sandbag.org.uk/ is doing the same thing. As discussed here: http://www.celsias.com/article/sandbag-stemming-rising-tide-greenhouse-gases/ .

    I saw the same comment at commontragedies that John did above. I don’t see the validity of their point. So long as the allowance caps are set according to actual hard declining emisson level targets, and the “retiring” firms aren’t sourcing their credits at the allocation/auction point, then this is just another actor in the after-market trading. Firms with allowances to sell can sell them to the highest bidder/at market rates. The “retiring firms” are just one of those actors. Good initiative. Tell your friends.

  12. Andy P says:

    Why the love affair with a cap and trade system to begin with? Seems like a straight up carbon tax would be far more efficient and easier to manage. It would also encourage industries/businesses to get to zero emissions as there would always be an incentive to reduce emissions further.

    My guess: “tax” is politically unfeasible as opposed to “market” which sounds nice but lets big business game the system and find the loopholes.

  13. Jim Prall says:

    Andy P:
    There’s probably something to that – anything with the word “tax” evokes a viceral reaction, particularly from conservatives – both here in Canada in and there in the U.S.

    For a long time I’ve followed the debate about how to assign some actual cost to CO2 emissions – to internalize that externality. The two options of carbon tax vs. cap-and-trade have plenty of people on either side with lots of pros and cons.

    Recently I’ve heard from more than a few source that it’s not necessarily either-or: both legally and practically you might decide to have some of both. I’m still thinking about how that would play out.

    As for buying and retiring some EUAs, I’m intrigued to hear that is now being offered as an alternative to voluntary, largely unregulated “private offsets”

    I don’t agree that buying and retiring credits has to open the way for emitters to be gaming the system, nor must it lead to regulators relaxing their targets. The idea is to put some new demand into the market for emission reductions (I want some!) in hard dollar/Euro terms. Emitters need to get the signal that it is worth investing in actual reductions so they will free up credits to sell on the open market. The higher we can keep the market price for credits/permits, the more money can go into making real reductions in order to keep the permits freed up for resale and not sent up the chimney.

  14. Bryony says:

    Just wanted to make clear sandbag.org.uk is a campaign dedicated to cleaning up emissions trading not a business. I was a campaigner with Friends of the Earth when both the first and second phase EU caps were being set – we were massively out lobbied and if we want to prevent this from happening in the future, in Europe and everywhere else, then civil society has to get more involved.
    Also we will buy permits and cancel them (on behalf of our members) if we have to, but first we are going to expose those companies who still have over allocations and ask for them back. Our public launch in the UK is pencilled in for mid Sept.

    Carbon Retirement is a good alternative to normal offsetting but I would sound a note of caution about the state of the market – because of banking, it is now perfectly possible for the price to remain firm but for there still to be many companies in the scheme with over allocations. In fact in the UK for the next five years, the only sector which needs to reduce is the power sector. We need to clear out over allocations – then in the future we can all buy and cancel permits safe in the knowledge we are not buying hot air.

    Best wishes
    Bryony