Get Ready for the Carbon Offset Accounting Follies

I have already written before about carbon offset companies apparently double or even triple counting carbon credits or offsets.  Here is another example, sent by a reader:

Reilly and Herrgesell, the company's president and project manager, respectively, have been trying to develop a way to "incentivize the consumer" for nearly two years. What they came up with was a model for selling personal carbon credits.

"(It's) a new idea," said Herrgesell, "but a very powerful idea."

To get started, you create a personal profile with usage data from your utility bills over the last year at My Emissions Exchange. Then, you reduce your energy consumption. My Emissions Exchange certifies your personal carbon credits, and sells them for you in the global voluntary carbon market.

The carbon credits are equal to a one-ton reduction in carbon emission, and are currently trading between $10 and $25, according to the site.

"This is the only effort out there that can align green activity with financial benefit," said Reilly.

First, I have looked at the site in question, and find no differentiation for how one's power is generated.  My power in Phoenix comes from a big honking non-CO2-emitting nuclear plant, so my actual carbon credits for reduction in electricity use are theoretically more complex.  Is the clean nuclear power I didn't used sold so it substitutes for fossil fuel power?  Did I cut my power peak or off-peak?  And does it substitute for gas (not much CO2) or coal ( a lot of CO2)?  Its amazing that there are real markets that will accept such soft savings as real credits to be paid for.

Second, in the proposed Waxman-Markey bill, utilities get counted directly on their CO2 output, so either this program will have to go away or else it will represent a double counting of the same benefit (as at the utility level your reduction in electricity use will also "count").

Third, the economic knowledge of the author quoted above is just staggeringly low.  I mean, all this time I thought electricity prices were how consumers were "incentivized" [sic] to use less power.  The implication is that somehow incentives are out of alignment and this is the "only effort" aimed at aligning them.  But consumers already save money by reducing their utility use (does anyone have a utility contract that reads the opposite?)  One might argue that these guys can provide an additional financial incentive that will create incentives for more conservation at the margin, but that's about it.

One Comment

  1. MyEEx Team:

    Thanks for looking at our site. We just wanted to clarify a few of your points.

    To your first point - at MyEmissionsExchange, your electric reductions are determined on a state by state basis using the blended emissions rate of all the power plants in your state as calculated by the U.S. Energy Information Administration. We also correct user emissions for seasonality and weather variation (using degree days) in order to determine your true carbon reductions.

    Second, regarding the Waxman–Markey, we are advocating that carbon credits go to the party that generates them. Is that an uphill battle against electric utilities? For sure, but we are opposed to double counting as much as anyone and we are trying to make sure the benefits go to those that earn them.

    Third, in theory, electric prices should provide incentive to conserve but if you look at U.S. per capita energy consumption, it is not working very well. The problem is getting an electric bill for something you did 30 days ago, and then trying to determine what you should do differently doesn’t lead to a clear action plan. The key is to provide measurement and feedback so that users can make decisions on conservation, and that is what MyEmissionsExchange is all about. Conservation is the main goal and provides the most reward to the user (the carbon credits are just a small bonus which we hope makes it a bit more attractive).

    If you want to reduce energy consumption and carbon emissions, then conservation and efficiency projects will be the quickest, easiest and lowest investment way to get the job done!