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Are You Paying Too Much for Your Carbon Offsetting?

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With the majority of Americans now at least concerned or cautious about climate change and the increased storms, fire, and drought mucking up travel and commerce, carbon is turning more serious. Carbon is quickly becoming currency, and you should start treating it as such, especially if you are currently paying large sums to offset carbon emissions from your business, your travel, or your events.

When traveling abroad, people are often zealous about getting the best exchange rate for their money so they can save a few dollars. Yet when someone exchanges their carbon emissions for an offset, they don’t seem to be as attentive to notice that underneath they could be paying a few dollars more than necessary to offset their trip, negating the currency exchange savings altogether. Multiply those dollars by a few thousand for a larger entity, and now it becomes part of a fiduciary duty.

What I love about sustainability is that it demands us to question the world around us and the relation our activities have on the environment and society, and to seek improvement and innovation. It forces us to question the status quo of how we do business and how we live, so that we may leave a better world for our children. However, as a relatively young field, sustainability itself sometimes falls victim to the myopia of accepting common practices without asking if the status quo could be improved. Nowhere is this more encountered than in carbon calculation, where we have seen some of the most ridiculous practices emerge. It’s time to reexamine these, so that you can get the most out of your carbon exchange rate. To do so, I present three common fallacies in carbon calculation which could result in increased prices for voluntary offsetting.

Fallacy #1: Carbon offset providers should be in charge of calculating your carbon footprint. Think about it this way: when doing your tax returns, would you trust an accountant who charged you more fees proportionate to the more amount of tax you paid? Of course not. Yet when it comes to carbon, somehow it has become common practice that the company selling you the offsets will also do your carbon accounting. Carbon offsetters have an inherent interest to return a higher carbon calculation because that is 100 percent aligned with their business model. Trust your carbon offset provider to find you a great carbon reduction project that tells a great story, and to ensure that your payment will go to that project. But would you let them do your taxes? How do you know that they’re being fair as to what they are including in the boundary, and how they’re performing the calculation? Even worse, that question can’t even be answered if also applying fallacy #2.

Fallacy #2: Carbon calculation methods can be proprietary and confidential. Imagine walking into a store, and at checkout for every item purchased, on top of a sales tax was a surcharge just for telling you how much each item should cost. Imagine a bank that charged you a fee each time you checked your monthly balance, and at the same time didn’t tell you the interest rates or fees over the past month or how your balance was calculated. Absurd. Yet when it comes to carbon, somehow there are still businesses out there with closed-box calculation solutions that don’t tell you how the calculations were performed. Moreover, they actually make claims that their calculations are much better than others, and thus should carry a premium. In the beginning of the carbon field this was necessary, as a major step toward carbon reduction was figuring out how to calculate. But now that carbon is currency, the paradigm has shifted. Carbon calculation should be transparent and open, especially when credibility is at risk. Yes there is validity in charging a fee to calculate carbon (especially when you consider the risks of fallacy #1), but not to keep quiet about how carbon was calculated.

More Art Than Science

The current reality of carbon calculation is that it is more of an art than an exact science. To arrive at a carbon footprint, a series of dozens, even hundreds, of assumptions are made amid an environment of uncertainty. This begins with the calculation of global warming potential itself and the greenhouse effect, to which there is scientific uncertainty. Not uncertainty about whether climate change exists, but uncertainty for the translation of climate change into factors, and the normalization across greenhouse gas sources. Apart from the science, the parameters of calculation have uncertainty, and several assumptions are made to come up with emission factors such as how much carbon is emitted from a kilowatt hour of electricity used. Then when using those numbers to calculate your own footprint, the boundary of what you include and what you exclude is subjective and requires assumptions. Finally, when calculating carbon without 100 percent of the data yourself, more assumptions need to be made.

The issue is whether the assumptions made in your own data are fair, and whether you are correctly applying other coefficients and methods that have been deemed as fair for their assumptions in their respective areas. And of course, that you haven’t messed up the calculation with a spreadsheet formula error. More and more, we are seeing standard calculation methods arise for certain products and services which will take the guesswork (and artwork) out of the equations. In each of these, calculation methods are still somewhat subjective, but the important step is to arrive at consensus for standardizing the subjectivity. At the heart of all this is transparency about fairness and assumptions made, which is why a proprietary calculation method doesn’t make sense, and carbon calculations should include the series of assumptions made to perform the calculations.

As carbon becomes currency, and as that currency is more commonly used, this becomes increasingly important. Case in point, I recently “negotiated” the carbon footprint of a client to be offset. We calculated the footprint using one method and set of emission factors, and the carbon offset provider did it another way with another set of emission factors. We all agreed that neither calculation method was wrong, but it was a matter of preference, viewpoint, self-determined boundary, assumptions, and calculation rigor. Considering fallacy #1, it was no surprise to me that that the carbon offset provider’s numbers were higher than ours. In some pieces of the calculation, nearly 40 percent higher. Their arguments for the higher values were not based on science or rigor, but just because they were more commonly used. What they failed to state openly however was that they also wanted to use higher factors because they wanted to make more money. If a carbon offset provider wants to make more money from a client, then they should do it through selling better projects at a premium, and help to overcome fallacy #3.

Fallacy #3: All carbon offsets are created equal. This is not really a fallacy, but more a first misunderstanding for those first looking into carbon offsetting. It’s also where much opportunity exists to enhance credibility and to maximize the intended reputational return sought when offsetting in the first place. Voluntary carbon offsets begin with specific projects. The types of projects are wide-ranging, from protecting rainforest to building wind farms to providing impoverished rural communities with clean drinking water. As each project is different in scope, the costs of each project and the cost per amount of carbon offset will vary.

Where’s the Story Behind Your Offsets?

Keep in mind that in voluntary offsetting, specific motivation existed for purchasing offsets in the first place. That motivation should be carried forth in choosing how you offset and how you leverage it. If you’re just looking to make a carbon neutral claim, carbon can be obtained for just a few dollars a ton. The projects probably won’t be very interesting though. If you’re looking to enhance your reputation for being socially responsible and environmentally sustainable, then the offset project chosen can strengthen your story and link to your business, your event, or your client’s interests. This is often a missed opportunity. I would guess that most people who purchased a carbon offset last year couldn’t answer the question, “What project did your offset go toward? Good carbon offset providers will broker projects for you that tell good stories, projects that relate to the impacts of your operations or activities, and projects which are local to the business, travel, event, or market in question. But the bottom line is that for voluntary offsetting, the cost of carbon will vary and is generally up to you. In fact, not only is the cost of carbon up to you, but so is the amount of carbon to offset. That includes the boundary you set, along with the calculation and many of the assumptions.

Those who look me up may think that I’m just arguing these points to further my own services of carbon calculation. Yes, my firm does plenty of carbon calculation, but that’s only a small piece of reporting, while our goal is to make sustainability discussions more common and more credible to a wider audience. If we can do that, then we all win, including all the longtime subscribers to this newsletter. As the saying goes, don’t be penny wise and pound foolish. Well I say when it comes to carbon, don’t be pound wise and ton foolish.

Eric Ricaurte is founder of Greenview, a firm specializing in helping global hospitality organizations, large events, and tourism destinations measure and report on environmental, social, and governance issues.

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