You may have heard of the idea of pollution credit trading. I’ve been pointed to two firms that are selling CO2 credits on the retail level for individuals, to offset the output from driving a car, heating a house etc.
I’ll get into the details on how it works a bit below, but if you have a car like mine that is putting out 5 metric tons of CO2 each year, you can for a low price (about $50, which includes a whopping markup) pay a factory somewhere to cut their own output by 5 tons, meaning that net, you are causing zero emissions. Which means you are reducing total emissions by a lot more than you would by switching to a Prius, and you are doing it at a vastly lower cost. (This doesn’t mean you shouldn’t drive a Prius, it just means this is a lot more effective.)
Normally pollution credits are traded only by the big boys, trading contracts with hundreds or thousands of tonnes of emissions. The retail firms are letting small players get in the game.
This is a fabulous idea, in theory at least, and also a great, if sneaky gift idea. After all, if you buy the gift of not polluting for your loved one all they get is a bumper sticker and a good feeling. At least it’s better than giving to The Human Fund in their name.
Here’s the catch. I went and priced the credits, and while www.certifiedcleancar.com wanted $50 to credit my car, the actual price of credits on the Chicago Climate Exchange is about $2.16 per tonne of CO2, or about $8 for my actual output as they calculated it. One expects some markup, of course, and even some profit for the company selling the retail credits, but this is nuts. I called the other company, Terrapass and got reasonably frank answers. First of all, they claim they invest more in wind power and other truly non-polluting forms of energy more than they just buy carbon credits. Secondly, this is still a small volume thing, and most of the costs are not the credits, but the $20,000 or so to become a member of the exchange, or so I was told. And of course, in small volumes, administrative costs can swamp the real costs.
Another outfit I found is carbonfund.org which is non-profit and cheaper. In some sense since people buy these out of guilt rather than compulsion (they were meant to be forced on polluters to give money to non polluters and make a market) non-profit might make sense, but they are also supposed to be a real market.
Still, if I pay $50, I would love for my $50 to mostly go to reducing pollution, not mostly to administration. Usually when exchanges are expensive there are members who will trade for you at much more modest markups. The folks at Terrapass said they were not yet profitable at the current prices.
And it is such a good idea. Read below for more on pollution credits.
At first I was skeptical of these credits. They seemed to be mostly moving pollution. And indeed often the credits result in cutting pollution somewhere you don’t live, though they can be designed to keep things local where possible.
They work as follows. You get an established polluter. They have to promise that they will legitimately cut their emissions by a specified amount, or prove that they have already done so. In theory, watchdogs make sure that this is a real cut, not just closing an unprofitable plant. Usually it is supposed to involve switching to better, less polluting systems, or better air cleaners, or moving from one fuel to another etc. In exchange for this they get bribes, if you will, from people who need to pollute. When the law is involved, the law will set emissions levels, and those who go even lower get credits they can sell to people who want to go over the limits. In voluntary trading, buyers are just bribing the emitters to cut their pollution.
People buy contracts into the future or even into the past. Companies can also trade within themselves, cutting pollution in one part of the business because they have to increase it in another part.
As noted, the biggest flaw is that often people in your town will pay a plant in a remote town so that they can pollute your town more. The people in the other town breathe cleaner air. Doesn’t sound good, but it’s better, or so the theory goes, than not stopping the pollution anywhere because companies lobby that it’s too expensive to do, or only making the greener companies cut back. The credits put a market price on things.
Now I personally take the environmentalist libertarian stance on pollution. Pollution should be absolutely forbidden. To do it, you should have to buy permission from those whose environment you will pollute. If they won’t give it, you have to move somewhere else that people will let you do it. But we’re not going to get this system any time soon.
Thanks to Nadine for pointing this out to me.