Carbon Offset Fraud?

The Wall Street Journal reports that the Federal Trade Commission is starting to examine whether buyers of carbon offsets may be getting a bill of goods:

The offsets are said to represent emissions avoided through projects such as installing wind turbines or planting trees, often in the developing world. Consumers are buying the offsets from a bevy of online sellers to counteract the emissions produced by daily activities.

But Federal Trade Commission officials said at a workshop on the issue that they are concerned that consumers who buy carbon offsets aren't able to verify whether they are environmentally legitimate.

The Financial Times recently did its own investigation of carbon offsets, and found that millions are being spent with no environmental benefits. The central findings:

• Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.

• Industrial companies profiting from doing very little - or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.

• Brokers providing services of questionable or no value.

• A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.

• Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts.

There's not really any way to know how much environmental good--if any--is being done through the purchase of carbon offsets. Trees planted in different climates have different value. In some cases, rainforest is cleared and new trees subsequently planted. In others, carbon offset buyers pay for trees that would have been planted anyway.

If carbon offsets were nothing more than a chance for tree huggers to pay a few dollars to feel good about their conspicuous consumption, none of this would matter. But as the Journal points out, firms are purchasing carbon offsets with the expectation that they will count toward future cleanup obligations:

Voluntary carbon offsets typically sell for as little as $5. Each offset represents one ton of carbon dioxide said to be kept out of the atmosphere. The businesses are betting that the relatively cheap voluntary offsets they buy up now will count toward their cleanup obligation under any eventual rule. That is far cheaper for most companies than retooling their operations to curb their own emissions.

Hopefully Al Gore and the Hollywood crowd can be counted on to help in the FTC's investigation, as well as any subsequent crackdown on fraudulent offset sales. They have always been strong proponents of government regulation generally, and it appears that this may be one area where environmental protection is being sacrificed to corporate greed.