The Washington Post carries an interesting article today about the durability of carbon offsets in the midst of a financial downturn — at least so far.

Seems that carbon credits peddled like stocks on fledgling markets, as well as those sold directly to consumers online as a way of “offsetting” some activity or event — a transatlantic flight, say, or a wedding — are doing well.

Or at least that’s the way the piece starts out, noting that “sales of carbon offsets — whose buyers pay hard cash to make amends for their sins against the climate — are up. Still. In some cases, the prices have actually been climbing.”

For those still unfamiliar with the fledgling market for offsets in the United States, the Post offers an explanation — and notes some caveats issued by critics:

On the surface, offsets sound like a simple transaction. Generally, the buyer uses an online tool to calculate the carbon footprint — the amount of harmful emissions — of a car, a flight or a year’s activities. Then the buyer pays an offset vendor to cancel out that footprint. This is done through projects that stop emissions from occurring or remove pollutants from the air.



Some offsets are sold like stocks on the Chicago Climate Exchange. Other groups sell them directly to consumers. One study last year found that offset prices ranged from $1.80 per ton of emissions to $300, with most about $6.10. Watchdog groups say offset vendors sometimes do not deliver what they promise. Some offset projects, such as mass tree plantings aimed at absorbing carbon dioxide, deliver climate benefits that are difficult to measure. In other cases, it is unclear whether offsets funnel money to existing projects or to projects that might have been done anyway.

That last bit refers to the notion of “additionality” — a concept that grew out of the Kyoto Protocol as a way of valuing carbon offsets against business-as-usual. That is to say, the value of a carbon offset in funding an emissions reduction project is — or ought to be — based in large part on whether that project would have happened anyway. If it would have, the offset has little value.

Think of it this way: If that mass tree planting referred to above would have happened whether or not you bought your greenhouse gas (GHG) offset — or whether an offset market even existed — then what’s been accomplished?

Writing last year at the online journal Nature Reports Climate Change, a Web site of Nature Publishing Group , an assembly of five scientists and climate experts called the fuzzy notion of additionality the “most vexing” challenge facing the offsets trade — particularly in voluntary markets like those in the United States.

The crucial question is whether the added revenue or other resources gained from selling GHG offset credits somehow enables a project’s implementation, or if the extra revenue simply lines the pockets of those who would have implemented the project anyway? In markets for public goods that lack some form of mandated quotas (for example, emission caps), additionality determinations serve the function of maintaining scarcity in the marketplace. Without them, GHG offsets representing business-as-usual reductions will tend to flood the market. There is no correct technique for determining additionality because it involves the evaluation of counterfactual circumstances. No test for additionality can provide certainty about what would have happened otherwise. The challenge is akin to statistical hypothesis testing. Adopt tests that are too stringent and one risks disqualifying many truly additional projects, thus restricting offset supplies and increasing their prices. But adopt tests that are too lenient, and the market will be dominated by ‘free riders’ who would have implemented their projects anyway.

Consider one landfill operator mentioned in The Post, who sells carbon offsets for a methane-capture project. What if there was no offset market, The Post asked? The project would have happened anyway, the landfill’s executive director said, adding that the offset cash is “gravy to us right now.”

Devloping market-wide standards for drawing lines, as well as creating mechanisms for government oversight, the authors of The Nature article say, is a first step. As it is, a wide array of competing industry standards are being developed, the experts lament, which might well undermine the whole enterprise: “Although the consequences are difficult to predict,” the authors write, “the confusion produced by a host of independent ‘standards’ operating in a regulatory vacuum has the potential to discredit market-based environmental policies.”

Indeed, it might not matter if the credit crunch begins to hit home for the well-heeled — the biggest consumers of guilt-assuaging credits. Wrote The Post today: “People in this business are worried that the guilt boom is about to bust.”