Outside the Beltway

Do Carbon Offsets Work for Travel?

Steve Verdon · Monday, March 5, 2007 · 5 comments

Can you reduce or even eliminate your “carbon footprint” when travelling by purchasing offsets? Online travel companies such as Expedia and Tavelocity have been offering this option where the customer can pay an additional fee to reduce their “carbon footprint”. What happens is that the money is passed along to organizations who claim to invest the money in technologies such as solar, wind, and energy efficient technology. But there seems to be some concerns.

Electrical engineer Ron Goltsch, of West Caldwell, N.J., says he looked into TerraPass because he’d been getting teased about how his frequent, worldwide travels contribute to global warming. He scrapped the idea when he learned from its website that it’s in business to make money.

“I have a lot of doubts when some for-profit business needs my cash to save the world,” he says. “What I want to know is how much of my $29.95 is going towards saving the planet, and how much is lining corporate pockets.”

What you expect them to do it for free? I see this as a childish complaint. The profit motive results in lots of good outcomes. Goltsch can feed himself, and his family if he has one, because of the profit motive. He heats his house, entertains himself, and educates himself all as a result of the profit motive. This was one of the insights Adam Smith noted well over 200 years ago. We often get life supporting/improving items not out of appeals to compassion, goodwill, or neighborliness, but by appealing to people’s desire to make their own lives better off. If we are going to get anywhere in regards to global warming it will likely be via the profit motive.

Because the industry is not regulated in the USA, the companies and organizations taking payments from consumers approach the task of cleaning up the environment in widely divergent ways.

“There’s no widely accepted certification for offsetters. No ‘seal of approval,’ ” says Michael Gillenwater, a Princeton University climate policy researcher. “No one knows what to trust.”

For example, for-profit TerraPass, which has a deal with Expedia, declines to disclose its finances, including its profit, citing competition. By contrast, Travelocity funnels travelers’ money to The Conservation Fund, a non-profit that merits the American Institute of Philanthropy’s highest grade for accountability and performance.

While I can understand the desire to have some sort of government approval to ensure that there aren’t companies ripping off customers, my own feeling is that such an approach will stifle innovation and creativity in this market which could have an adverse impact in terms of limiting greenhouse gases (GHGs) or at the very least make it more expensive. About the only thing that might be useful is some sort of disclosure policy similar to what we see with companies listed on stock exchanges. Also, there are options that rely on non-profit organizations which have more strigent disclosure requirements.

Critics in the environmental movement also fear that selling offsets may divert public attention from what they view as a more effective remedy: stricter laws.

Stricter laws might not be the solution. The goal is to reduce GHGs, but there is nothing that says it has to be done via a specific mechanism. This is why a tax on GHGs would be about the only law that I’d even consider. This would raise the cost of emitting GHGs (thus internalizing the costs) and induce emitters to look at a variety of strategies/solutions for reducing such emissions. Another alternative would be a GHG trading scheme, but those can be complicated and hard to set up, and even if they are set up, experience from Europe indicates that it might not work.

In any event, the idea of purchasing carbon offsets to reduce one’s carbon footprint is growing in popularity.

The practice of paying to offset carbon dioxide has been growing rapidly, and it isn’t limited to travel. Last year, individuals and companies worldwide bought $110 million worth of voluntary offsets, vs. $6 million worth in 2004, Karmali says. Individuals offset car use and energy usage at home. Corporations offset employee travel, important meetings and electricity consumption. It has grown downright trendy.

While I tend to be more skeptical about some of the dire claims about global warming and even more skeptical about some of the proposed remedies, I have to say, I find the idea of voluntary activity far more agreeable. If somebody wants to purchase carbon offsets with their money, that is fine by me.