Offsets in sync with carbon

28 Apr 2007Archived News Energetics in the News

PUBLISHED: The West Australian - By Carolyn Batt - Cheryl Bowler, Principal Consultant, Energetics Pty Ltd was asked by The West Australian to comment on the advantages and risks to a company's reputation when claiming to be carbon neutral.

 

The desire to be a good corporate citizen is prompting many businesses to invest in offsetting their carbon emissions. But the burgeoning industry is mostly unregulated and has pitfalls for the unwary. Carolyn Batt reports.

First it was just the long-haired greenies who did it. Then corporate heavyweights like ABN Amro and KPMG, as well as sporting outfits like the AFL, got in on the act. And now even Her Majesty the Queen has joined the carbon offset party. Going "carbon neutral" to counter environmentally unfriendly activity, in the process buying public respect and assuaging the guilt factor, is big business and getting bigger by the day.

"The whole market has escalated at a rate that has caught people by surprise," said Andrew Grant, head of carbon credit provider CO2 Australia, a subsidiary of ASX-listed CO2 Group. "WA was slower to respond initially, but is now moving more rapidly than some States."

And Carbon Neutral chief executive Leo Kerr, whose organisation is planting 93,000 seedlings on behalf of Western Power to offset the energy companys emissions, said: "There has been a definite shift in the boardroom with the realisation that if companies want to protect their market its in their own self-interest to protect this planet. They're insuring their future."

Carbon offset groups help consumers and corporates calculate the emissions of their everyday activities, and then, in return for a payment, undertake to offset those emissions by planting trees or investing in renewable energy. The ultimate prize is to become "carbon neutral", or reach a state where emissions are reduced to zero through efficiency savings and offsets. This is difficult to achieve, but recognising the buzzwords rapid acceptance into common parlance, the New Oxford American Dictionary chose "carbon neutral" as its word of the year for 2006.

Investing in offsets is still mostly voluntary in Australia, but Professor Peter Newman, director of Murdoch Universitys Institute of Sustainability, calculates that if Australias 21 million inhabitants all paid to counter their emissions, it would create a fund of $3.5 billion per year. For businesses, the incentives lie not just with being a good corporate citizen. An increased focus on environmental issues can motivate energy savings, improve staff satisfaction and retention, and benefit the corporate brand. But the sheer size of the market, combined with a lack of regulation, has raised fears in Australia and overseas that disreputable operators are taking advantage of nai|ve businesses and individuals.

Providers vary in their nature - there are not for profit groups, as well as commercial enterprises such as CO2 Australia - and in the quality of their offsets, the methodology and accuracy of their carbon calculators, and the price charged per tonne of carbon offsets. "We believe that some unscrupulous types are moving in because they see an opportunity to make a buck," Mr Kerr said. "Its a buyer beware situation."

He said anyone planning to have their emissions sequestered through tree planting should be rigorous in investigating a providers experience, ability to give information regarding the location and progress of plantings, and whether they were approved or in the process of becoming approved under either the Greenhouse Friendly or NSW Greenhouse Gas Abatement schemes. (At this stage CO2 Australia is the only tree-planting company to have the Greenhouse Friendly accreditation, although several other providers are in the process of applying).

In the case of non-profit companies, buyers should also look at the proportion of the offset payment diverted to administration and related costs. "Some offset providers are not showing any evidence that the trees are actually planted and looked after," Mr Kerr added. "Its all very well to plant trees, but they need to be nurtured."

Music group Coldplay discovered this to its detriment last year. Having trumpeted the planting of 10,000 mango trees in southern India to offset emissions caused by production of its hit album A Rush of Blood to the Head, the band was embarrassed at revelations many of the trees had since died.

Clean Air Cool Planet, a non-profit US organisation dedicated to finding solutions to global warming, issued a report last December evaluating 30 offset providers around the world. It concluded there was "considerable room for improvement".

"Its an unregulated market, and thats a worry," said Cheryl Bowler, principal consultant in carbon markets at energy consultancy Energetics.

Confusion in the market is exacerbated by the variation in offerings. WestBusiness investigated the level of emissions for a return flight from Perth to Sydney with four different providers, with each calculating a different figure. The cost of offsetting those emissions also varied, although this is partly explained by the different projects undertaken by the groups.

In a forestry scheme, the number of trees and cost can vary according to the location, species, soil type and type of planting, while renewables projects are generally significantly more expensive than tree-planting programs.

In a report on carbon offsetting released earlier this month, Energetics said: "It is crucial to the credibility of a carbon reduction claim that the buyer ensures that the money is being spent on legitimate greenhouse abatement activities. Clearly consumers will be interested in the cost of the offsets, measured in terms of $/tonne greenhouse gas abated. But it is also critical to understand what you are buying."

Ms Bowler also warned that despite the apparent positive impact on corporate image of investing in carbon offsets, companies should be aware of the huge reputation risk involved. Wrongly claiming carbon neutrality, or investing in projects which failed to deliver the promised environmental benefits, could lead to accusations of corporate "greenwash" and claims from angry shareholders, she said.

"Carbon risk is like a liability on the balance sheet. In the future, companies are likely to have to do something about it when there is a price put on carbon emissions. Any inaccurate statement on carbon neutrality or the size of the carbon footprint now is misleading people on the future carbon risk in your business."

Despite concerns about some aspects of the industry, rising enthusiasm from the corporate sector suggests investment in offsets will gain momentum. One of the arguments most frequently cited against carbon offsetting is that rather than changing consumption patterns, such schemes encourage energy users to continue operating the way they have always done.

However, ABN Amros Australian head of global markets Col McKeith said the bank anticipated the reverse. "By having the cost factored into our business, we now have an incentive to get rid of it," he said.

Cost of Business

  • Each tonne of waste paper requires one cubic metre of landfill space, producing 2.5 tonnes of greenhouse gases
  • A computer left on all year needs 500kg of coal-fired energy, which produces more than 1t of CO{-2}
  • A return plane trip to London, per person, creates about 9t of CO{-2}
  • The average Australian car emits 4.5t of CO{-2} a year
  • The average Australian contributes 28t of CO{-2} on average each year, enough to fill 65,000 wheelie bins with greenhouse gas
  • Up to 10 trees are required to neutralise 1t of CO{-2}

Sources: CO2 Australia; Climate Friendly Flight of Fancy Cost to offset CO{-2} emissions for the 6560km return air trip Perth-Sydney Carbon Neutral - 2.23t of CO{-2};10 trees needed; offset cost of $30 Climate Friendly - 1.9t; renewables offset cost $42.83 Greenfleet - 2.4t, nine trees needed; offset cost $21.17 CO2 Australia - 1.79t, five trees needed; offset cost $28.64

Join the conversation