Voluntary carbon offset schemes in practice

Main providers

In 1989, the first carbon offset project was organized in the USA. At that time, Applied Energy Services committed to plant 50 million trees in the Western

Highlands of Guatemala in return for permission to build a coal-fired power station (Carbon Trade Watch, 2007, p. 14), In 1990, the Solar Electric Light Fund, the fust carbon offset provider, started operations in the USA, followed in 1992, by Prima Klima Weltweit, a German organization.Today more than 40 competitors are active on the market, most of them based in the USA, the UK, Germany, Australia, and other rich OECD countries. Currently, there is not a single offset provider originating from a developing country. Among the leading carbon offsetters in the segment of aviation-related offsets, both non-profit and for-profit organizations coexist. Eminent examples include atmosfair (Germany, non-profit), myclimate (Switzerland,non-profit), Climate Care (UK, for-profit), and The Carbon Neutral Company (UK, for-profit).

Functioning

The idea behind voluntary offsets is to “neutralize that part of a carbon footprint not addressed through direct emissions reductions, the purchase of emissions-free electricity, or other means” (Trexler Climate + Energy Services, 2006, p. 1). Achieving carbon neutrality therefore requires a multi-stage approach. Ideally, in stage one, the exact size of the carbon footprint will be assessed. Stage two sees the implementation of reduction measures at the source. In stage three, the remaining unaccounted-for carbon emissions have to be calculated, after which in stage four, a sufficient number of GHG offsets must be purchased to cover this difference (ibid, 1).

The choice of offset projects differs substantially among offset providers. Most, however, prefer to finance the extension of land-based sinks, i.e. they focus on forestry- and plantation-based sequestration. Others, by contrast, opt to invest their funds in renewable energy projects, energy-saving schemes, etc.

Critical assessment

UNSOLVED ISSUES WITH RESPECTTO OFFSET SCHEMES

Aside from the fact that forestry-based offset projects, which are still the most popular ones but are likely to run into severe spatial constraints in the foreseeable future,'’ a number of specific problems exist.

METHODOLOGICAL UNCERTAINTIES REGARDING

THE CALCULATION OF THE CARBON FOOTPRINT

To help customers calculate the required number of offsets, almost all providers offer their own more or less sophisticated carbon calculators on their websites. However, even for identical itineraries, the results typically differ substantially. What is more, purchase prices for the offsets also vary substantially - often by a factor of 6, while at the same time many offsetters do not provide their (potential) customers detailed information about the nature of their projects.

As these surprising differences cannot be attributed to the nature of the offset providers business models — non-profit vs. for-profit — calculator (in) accuracy as well as the lack of relevant data might be the main culprits. Indeed, the carbon footprint of a flight is not nearly as simple to calculate as it may appear, as a large amount of data and many types of effects must be considered. Crucial factors include, but are not limited to flight distance, cruising speed and altitude, type of aircraft (size, age, etc.), load factor, economy vs. business vs. first class travel, and weather conditions (which might affect contrail formation and radiative forcing, etc.) (Kollmuss and Bowell, 2007, p. 26ff).

DUBIOUS QUALITY OF SOME OFFSET PROJECTS

Three dimensions define — and possibly undermine — the overall quality of offset projects:

• • Additionality (which must be guaranteed)
• • Double counting (which must be avoided)
• • The providers integrity

Obviously, ecological effectiveness can be achieved only if the providers of carbon offset schemes can ensure that consumers investments actually result in an offset. In other words, additionality must be assured. While one indicator of additionality might be the fact that the project would not have been realized without the provider’s financial support, this is not a simple task in practice, even if the available additionality tests are properly applied, for several reasons.

First of all, since most offset projects are forestry-based, providers must ensure that the carbon will remain sequestered permanently, or at least for a very long period of time (at least 50 years); otherwise, a carbon sink will be transformed into a carbon source due to natural processes (rotting) or as a result of human action (slash and burn, etc.).

Second, double counting of offsets must be discouraged to prevent multiple stakeholders from claiming credits from the same offset activity. The most appropriate solutions to this problem would be to retire offsets once they have been sold (to prevent them from getting sold several times to different buyers).

Third, more information should be made available to potential customers of offset providers about the types of projects pursued and their success rate, and last but not least, the percentage of funds which is actually invested (as opposed to being used to cover administration costs and profit targets).

To summarize, in order to continue to see passenger numbers grow and simultaneously to maintain its eco-friendly image into the future, the industry will have to accept a mix of greater transparency and some form of selfregulation or governmental standards to overcome the existing information asymmetry. But the design of standards and the evaluation of offset programmes will also result in non-trivial transaction costs (Parliamentary Office of Science and Technology, 2007).

THE BROADER CONTEXT-VERY FEW PASSENGERS PURCHASE OFFSETS!

It is fair to assume that carbon offsetting, for being a voluntary contribution, is highly unlikely to reduce the demand for air travel — the very source of aviation-related GHG emissions - significantly.The manifold design flaws regarding the functioning of carbon offsetting notwithstanding, this result could nevertheless be considered acceptable if the airlines’ voluntary carbon offsetting schemes were broadly accepted and heavily used by passengers. Unfortunately, the opposite is true. However, most airlines are reluctant to publish participation figures, and the few academic studies on passengers’ willingness to participate focus on motivational factors (Fang-Yuan, 2013) rather than gather evidence on pick-up rates. The first hint on the ineffectiveness of voluntary carbon offsetting schemes in the airline industry was provided by British Airlines which admitted in a parliamentary hearing that passengers chose to offset only 3,000 tonnes out of a total of 27 million tonnes emitted since the introduction of carbon offsetting in September 2005 - less than 0.01% of the total (Davies, 2007). Afterwards, pick-up figures improved slightly but remain insignificant from a climate policy perspective; in 2009, 126,000 out of 33,117,000 passengers opted in, 0.3% of the total (British Airways, 2009, p. 37). In 2011, British Airways scrapped its voluntary carbon offsetting scheme, replacing it with its One Destination Carbon Fund which will invest passengers’ donations in CDM-conforming projects in the UK.

Lufthansa does not make data on the number of passengers who have chosen to purchase offsets available to the public. However, the company’s annual Balance report - an overview of the company’s GSR strategy and projects — provides at least some indirect evidence in its 2014 edition Lufthansa Group, 2014, pp. 52, 78). According to this corporate source, in 2013, Lufthansa passengers bought offsets for the equivalent of 14,000 tonnes of CO, emissions. In the same years, the passenger division of Lufthansa (i.e. excluding cargo and the other airlines of the Lufthansa Group) emitted 21,016,246 tonnes. This means that only 0.06 per cent of total CO, emissions were voluntarily offset. According to a comparative study of voluntary carbon offset regimes published in 2011 (Eijgelaar, 2011), current sales of flight offsets compensate less than 1% of all aviation emissions (about 700 million tonnes in 2013).

As always, there are some exceptions. Qantas reports that over 10% of passengers have been offsetting their flights. Since 2007, the airline has offset 3 million tonnes of carbon emissions. Recently it has been giving frequent flyer points to passengers who offset, and this has led to an increase in offsets (Hatch, 2019).

Therefore, in comparison to alternative internalization strategies, economic pressure to reduce fuel consumption and, as a result, GHG emissions, based on voluntary schemes is quite limited. In other words: while carbon taxes or the participation in an ETS would, ceteris paribus, provide incentives for technological and operational improvements, voluntary carbon offsetting translates into minimal dynamic efficiency in the airline industry.

Nevertheless, from a lobbying perspective, the attractiveness of carbon offsetting for airlines is obvious. Offset schemes may be pushed by industries like aviation for the benefits they create in helping airlines by providing them with ample PR opportunities to “greenwash” their products and services, and creating a good CSR image, without their incurring any adaptation costs (Transnational Institute, 2007). More transparency, including public disclosure of the low participation rates, is therefore not in the interest of the airline industry, although it is clearly warranted in the ongoing debate on the efficiency and effectiveness of climate change policies.