Skepticism and Carbon Neutrality

It was just months ago that Webster's named "carbon neutral" the word of the year. But in the last month or two, we've seen the first wave of "neutrality skepticism" expressed in articles from publications like NYTimes, FT, and Newsweek.

We can argue about whether these article got the details right, but I think that misses the point. The reality is that the media and the general public have a justifiable right to be skeptical about the neutrality claims and the related use of credits and offsets. In voluntary markets, this has been the focus of a heated industry debate for some time now. However, even in the EU ETS, it's apparent that there is a wide range of quality issues and accounting problems with CDM-originated offsets and gaming of credit allocations.

Rather than denying there's an issue, the neutrality and renewables industries need to take the issue head on. This is a credibility issue that threatens to undermine the public's trust in the very notion of trading emissions, a principle that is critical to ensuring the marginal cost of reversing our emissions trends is shared fairly and equally among market participants. If the public's skepticism attaches to the notion of trading emissions--rather than to the underlying issues of credit quality, standards, accounting methods, and neutrality practices--we will have lost a valuable economic tool in the fight to capture externalities and reverse climate change.

I'm a huge believer in credit/offset trading for both carbon and renewable energy--so I see this issue framed from the perspective of an enthusiastic advocate. In my opinion, the industry needs to do two things quickly:

• Adopt standardized methods and practices for achieving carbon neutrality. Some very well-meaning companies have received poor advice and have chosen as a result to simply "offset" their carbon footprint with bulk REC and/or carbon credit purchases. We need to encourage more rigorous practices that emphasize process change, energy efficiency, and onsite renewables--with offsetting as a final method for addressing emissions that cannot be reduced otherwise.
• Address the quality problem by establishing rigorous standards for the origination and accounting of credits/offsets. There are industry groups working to do this now, and it's my hope that what results are credible and rigorous, rather than self-serving, standards.

Certainly we should not let "perfection be the enemy of the good"--yet conversely we cannot let market expedience be the argument for practices that hurt the public perception of the neutrality industry in the long term.