Coyote Warned You

Who would have ever predicted this...

BARNET, VT. -- Sara Demetry thought she had found a way to atone for her personal contribution to global warming.

psychotherapist clicked on a website that helped her calculate how much
heat-trapping carbon dioxide she and her fiance emitted each year,
mostly by driving and heating their home. Then she paid $150 to, a company that promises to offset emissions.

But Demetry's
money did not make as much difference as she thought it would. While
half of it went to plant trees to absorb carbon dioxide, the other half
went to a Bethlehem, N.H., facility that destroys methane -- a gas that
contributes to global warming. The facility has been operating since
2001 -- years before the company began selling offsets -- and Demetry's money did not lead the company to destroy any more methane than it would have anyway.

Well, I predicted it:

I don't have any inside information on TerraPass, the company made
famous by providing the $399.75 certificates that offset all your
emissions for a year.  I do know that the numbers don't seem to add up,
as I wrote here and Protein Wisdom similarly wrote here.

However, I thought about their business model some (since I have been on a role with new business models) and it strikes me that it is brilliant.  Because I am almost positive that they are (legally) reselling the same carbon credits at least three times!...

  1. Their energy projects produce electricity, which they sell to
    consumers.  Since the
    electricity is often expensive, they sell it as "CO2-free"
    electricity.  This is possible in some sates -- for example in Texas,
    where Whole Foods made headlines by buying only CO2-free power.  So the
    carbon offset is in the bundle that they sell to
    electricity customers.  That is sale number one. 
  2. The company most assuredly seeks out and gets
    government subsidies.  These subsidies are based on the power being
    "CO2-free".  This is sale number two, in exchange for subsidies. 
  3. They still have to finance the initial construction of the plant, though.  Regular heartless
    investors require a, you know, return on capital.  So Terrapass
    finances their projects in part by selling these little certificates that you
    saw at the Oscars.  This is a way of financing their plants from people
    to whom they don't have to pay dividends or interest "”just the feel-good
    sense of abatement.  This is the third sale of the carbon credits.

My guess is that the majority of carbon offsets sold are for projects that would have gone ahead anyway, without the purchase of the offset (for example, planting trees or building power plants).  In this case, e-BlueHorizons is doing #3 after the plant was commissioned.   Caveat Emptor.  HT: Maggie's Farm


  1. eddie:

    Say I'm a rich eccentric and I want more people to wear blue socks. I'm willing to put up money to make it happen. I offer to pay anyone one dollar for every day they wear blue socks. All well and good, right?

    Suppose you have a job where the uniform includes blue socks. Should I pay you or not?

    Some say no, because you were going to wear blue socks anyway even if I didn't pay you. You shouldn't get any credit for doing something to increase global blue-sockness. Your blue socks aren't additional.

    Others say, yes, absolutely, you should get paid, even though it seems like you're getting paid twice for the same socks - once by your employer, and once by me. Here's why. You didn't have to take a job where you had to wear blue socks. You could change jobs at any time. More importantly, there are some people that don't have the same job you do, but might be willing to change jobs if it paid a little more money. You and they are the marginal job-holders. If the pay goes up, a few more people take that job, and thus a few more people end up wearing blue socks.

    The methane disposal facility is like that. Yes, they'd been in business burning methane since before they started getting offset credits for it. Yes, they'd keep burning methane even without the credits. But getting the credits makes their methane business more profitable, which allows them to expand operations. When the marginal profit per unit of burnt methane goes up, they will find ways to burn more units.

    You can read the same criticisms of buying Renewable Energy Credits from existing wind farms. Some say "why are you wasting money supporting a wind farm that's already built instead of funding new projects?" Such arguments are economically ignorant. More projects will get funded to the degree that existing projects show they can be profitable. Giving money to existing projects makes them more profitable, and by doing so helps new projects get funding just as much as if they had been given the money directly.

    I really don't get why you're so eager to dismiss carbon offsets. Market-based, voluntary, based on solid economic principles... what's not to like? Don't hate them just because Al Gore and Hollywood like them. After all, the radical left-wing anti-capitalist environmentalists at the Transnational Institute hate offsets too, because they distract attention from the "collective political action that needs to be taken to tackle climate change".

  2. eddie:

    The Globe article also mentions this:

    Moreover, the project received a "dirty dozen" award from a New England environmental group in 2004 because it burns the methane as fuel to incinerate contaminated water from the landfill, emitting tons of pollution each year in the process. This method of destroying methane can emit more pollution than other burning methods.

    This supports the lead of the story, which is "You know, those offsets aren't really as good as you think. Why, look, they're actually funding nasty polluters who aren't really reducing carbon output anyway!"

    But a little research suggests to me that the charge of "polluter!" is pretty silly. They incinerate polluted water from landfills using methane from landfills. If they didn't do that, the polluted water would leak out into the water table and the methane would leak out into the air. They're actually reducing the net pollution associated with landfills. Which shouldn't be surprising, after all. Do you think anyone is going to pay them to add pollution? Or maybe they're just burning all that stuff for the fun of it, probably while smoking cigars and laughing at the plight of the helpless rain forests.

    Here's their description of what the plant is and what it does. Here's the gripes of the people who don't like what they're doing, including another reference to the "dirty dozen" award. It seems to me that the gripe isn't that they're polluting the environment (in a save-the-planet kind of way), it's that they're polluting the environment where these particular people live (in a Not-In-My-Back-Yard kind of way).

  3. Ironman:

    Carbon offsets are truly miraculous! They can do just about anything!

  4. eddie:

    Carbon offsets are cheap now because the tons of carbon reductions being traded now are the ones that are easy to reduce. As more people start buying offsets, the prices will rise - not just because of more people bidding up the price of a limited supply, but also because as more carbon reductions get made, the marginal cost of those reductions will go up.

    Which is exactly as it should be.

    Global warming alarmists think we need to cut emissions now at any cost or we'll all be surfing in Arizona. They either don't understand or don't believe (or don't care) that cutting emissions has costs as well. Carbon markets let us discover just what those costs are. They will go up as we start increasing reductions in emissions. So a tree-hugger can buy his "smugness certificate" from Terrapass for a hundred bucks a year. Great. When everyone is cutting their carbon and we're past the cheap and easy reductions, he'll have to fork over a thousand bucks a year to feel smug. Maybe he'll start deciding that being carbon neutral isn't such a great idea after all when he thinks about how many child immunizations or homeless shelter meals that thousand bucks could buy instead.

  5. DirtCrashr:

    Saw a Ford Expedition in a Palo Alto parking lot with a TerraPass bumper-sticker proclaiming its Eco-Virginity. It was dirty and looked like it had just come back from a ski-weekend at Tahoe.
    When the costs of carbon-offsets threaten child immunizations or homeless shelter meals we can start up a societal-offset market and sell bumper-stickers that say "SocioPath"...

  6. Jim Collins:

    Am I the only one who thinks that Charles Ponzi would be proud of these offsets?