NCPA - National Center for Policy Analysis


August 6, 2009

In the battle against climate change, most media attention has been paid to "cap-and-trade" schemes.  However, there is a second path to global warming salvation: carbon offsets, says H. Sterling Burnett, a senior fellow with the National Center for Policy Analysis.

Under the carbon offset scheme, a country (or company) can meet its emission targets by paying others to reduce their emissions.  To facilitate this process, the United Nations created the Clean Development Mechanism (CDM), an international market where buyers who need to offset their emissions can purchase carbon credits from developing countries -- effectively paying for emissions reductions by others.

Unfortunately, proving that emissions cuts are reductions that wouldn't have occurred without the offset payments is difficult.  Recent evidence reveals that offsets are vulnerable to fraud and actually increase costs, says Burnett:

  • Almost three-quarters of CDM-registered projects are already complete at the time of approval and do not need carbon credits.
  • Nearly 40 percent of those projects represent "unlikely or at least questionable" emissions cuts and between a third and two-thirds of CDM offsets do not represent actual emission cuts.

Moreover, it's inherently difficult to measure emission reductions under a carbon offset project, says Burnett:

  • Currently, 30 percent of carbon offset credits pay for the capture and destruction of trifluoromethane (HFC-23), a green house gas created as a by-product of manufacturing refrigerant gases.
  • The carbon offset credits that are sold are twice as valuable as the refrigerant itself; HFC-23 emitters could receive as much as $7.15 billion from the sale of carbon offsets.
  • However, if companies paid plants directly, the cost would be less that $155.4 million; yet, they would be going against the company's carbon reduction requirement.

If Congress does act, it should be skeptical of the merits of carbon offset schemes, says Burnett.  Thus far, they have proven expensive and open to fraud and abuse.

Source: H. Sterling Burnett, "Carbon Offsets: Scam, Not Salvation," Powermag, August 1, 2009.

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