In 1997, a small company began planting single trees for individual consumers to help combat climate change. The offering was small, the science was incomplete, and awareness was limited. Nevertheless, the company had a vision for the future, a future filled with new forests offsetting the greenhouse gas (GHG) emissions of individuals and corporations around the world.
The trees--by consuming carbon dioxide (CO2) during photosynthesis and their growing cycle--would counterbalance the daily CO2 that came from driving to work, burning coal to produce power, or flying to meetings. Planting the trees would not be that expensive and it would offer a cost-effective opportunity to reduce emissions deemed absolutely necessary to life in the 20th century.
With a clear nod to the future they envisioned, the company called itself, simply, Future Forests. On 14 September 2005, Future Forests changed its name to The CarbonNeutral Company.
In many respects, the company's evolution--from its launch as Future Forests in 1997 to its new name change to CarbonNeutral--parallels that of the voluntary carbon market since the turn of the century.
"For the last three to four years, we've been offering an end-to-end carbon management service," says Jonathan Shopley, CEO. "As we've grown in that sector we've found that our name has become something of a misnomer."
Many things have changed since Future Forests got its start. The Kyoto Protocol came into effect in February of this year after Russia ratified it. With it came fledgling markets for offsets under the terms of the Clean Development Mechanism (CDM) and Joint-Implementation (JI) protocol. And the European Union developed and implemented a nearly continent-wide cap-and-trade program for CO2. A true--and active--compliance market was born, where allowances in the EU Emissions Trading Scheme (EU ETS) cost as much as EU$29 per metric ton.
But there are few trees in sight. The multilateral overseers of the CDM and JI have not yet seen fit to approve any of the methodologies explaining how new trees absorb CO2 and keep it out of the atmosphere. And the EU ETS seemingly rejects the idea of forestry projects, preferring to focus on reductions from industry and electricity production.
With such compliance markets quickly ramping up, voluntary efforts--like Future Forests--might have taken a back seat. Instead, the voluntary market has broadened the reach of mandatory efforts. In fact, according to a study from the Hamburg Institute of International Economics, the voluntary market alone accounted for 9 million metric tons of CO2-equivalent in 2004--offsets that would not have happened otherwise. "If these offsets are truly additional, then the voluntary market is additional to the regulatory market," says John Niles, manager of the Climate Community and Biodiversity Alliance (CCBA), a standard-setting coalition of corporations and environmental groups. "If they are additional, then it should be encouraged. It's more carbon staying out of the atmosphere."
While the CarbonNeutral Company says it no longer focuses on planting single trees for crusading citizens, it has expanded its business by helping corporations assess their emissions and make their own reductions through project portfolios that may or may not include offsets (from tree-planting or otherwise). The company also helps corporations wield their newfound carbon neutrality to best effect in marketing, sales, and public relations.
"If you're out there offering offsets as a sole solution, there is a temptation to suggest that people are buying offsets as a means of avoiding deep, hard decisions about their operations," says Shopley. "We've never seen offsets as an alternative to [other changes], but rather [we see them] as an integral part of a carbon neutral program."
Many European consumers understand climate change. From wind farms in Denmark to car taxes based on carbon emissions in the UK, national efforts are in place that put climate change in the public spotlight again and again. European consumers also want to do something about it in their own lives. "The CDM continues to be for countries and large corporations to get involved in. It's not accessible to the individual consumer," explains Tom Morton, director of Oxford-based offset provider Climate Care. "People like the idea of offsetting their emissions and so they come to people like us to do that."
And the number of people doing that seems to be growing by leaps and bounds. "We've seen a sevenfold increase in our Internet sales this year," Morton says, noting that his company has already sold roughly 100,000 metric tons of CO2 this year--double last year's total already. "The Internet is becoming one of our biggest clients."
Spurred on by this growing awareness, more and more Europeans are offsetting the emissions from their air travel--a major source of GHG emissions that go directly into a sensitive portion of the atmosphere--through programs like Dutch-based Business for Climate's COOL Flying or Switzerland-based myclimate tickets.
And, where consumers lead, it is hard for companies not to follow. Recent innovative efforts range from credit cards that allow you to earn carbon offsets rather than air miles, to gasoline whose carbon emissions have been offset, to climate neutral fruit drinks. "They offset the emissions of the transport of the exotic fruit to Switzerland and the making of the plastic bottle," explains Corinne Moser, a founding member of Zurich-based offset provider myclimate.
With this much consumer and corporate interest, Europe has a multitude of companies looking to provide offsets in a variety of ways and at various prices [view a list of companies (.xls)]. "The three factors in price are: offset class, the overall volume, and where [in the world] you go to purchase," says Ingo Puhl, managing director at German offset provider and carbon consultant 500ppm.
In the early days, trees were the most popular offset class. "One reason people want forests is because it is tangible," explains Denis Slieker, director of Netherlands-based offset provider Business for Climate. "It also has an emotional aspect. It not only helps the climate, it's also nature, a home for animals and community development."
But as the offset market has grown, so has criticism of efforts simply to plant trees or avoid cutting down existing forests. Environmental groups and others have said that such projects do little to reduce overall pollution, are scientifically unreliable (an argument seemingly born out by recent studies), and lack the necessary permanence. Even though much of the language of the Kyoto Protocol and other market-based efforts covered exactly how such forestry projects could be done, these concerns--plus the complexity they engendered--effectively eliminated forestry from mandatory markets.
But in the voluntary market, such forests could flourish, thanks to the intuitive appeal of trees and the host of other benefits they bring with them. "Most people want to see that they're own relatively small purchase has made some difference," says Richard Tipper, director of the Edinburgh Centre for Carbon Management (ECCM) and its Plan Vivo system. "We've identified that as consumer additionality."
Under the terms of Plan Vivo system, small farmers in Mexico, Mozambique and Uganda are able to get extra money from ECCM and its buyers in exchange for planting trees on part of their land or not clearing forest stands that are already there. "The idea was to see if we could use the carbon market to develop a long-term income stream that would be contingent on actual progress but would also give farmers the ability to plan exactly what they wanted," Tipper explains.
While the cost was higher--$13 per ton of carbon--the technical specificity and long-term monitoring of Plan Vivo as well as its community development benefits--$8 out of the $13 price goes directly to farmers--made it an attractive option, despite the apparent drawbacks of forestry. As a result, since 1997, ECCM has sold 250,000 metric tons of CO2 reductions from its project in Chiapas, Mexico.
"I would hope that things like the Plan Vivo system provide a framework for dialogue between buyers and sellers. What type of legal agreement do you want with the farmers? Do you want something that you can legally enforce?" Tipper says. "Our buyers said 'No. We just want to make sure that our money is being put to good use.'"
Trees are also popular in other parts of the world, outside the direct realm of the Kyoto Protocol and Europe's mandatory market. Australia, which explicitly repudiated Kyoto in 2002, has Greenfleet, a nonprofit offset program. For AU$40, a buyer offsets car travel CO2 emissions for one year (based on estimates of 4.3 metric tons for an "average" vehicle) through the planting (and growing) of "17 trees."
"We have planted over 2 million trees in excess of 250 sites up and down the seaboard of eastern Australia," says Sara Gipton, Greenfleet's business manager. "Trees are planted on land made available by the owner under a 'carbon agreement' which ensures the security of the trees as long as that landholder holds that land."
It's an effort to cut back on Australia's transportation emissions--not unlike BP's climate friendly fuels--as well as an effort to restore cleared land and prevent further degradation of the soil. And it's not only nonprofits like Greenfleet getting in on the act.
Sydney-based New Forests Pty Limited--an independent offshoot of the Hancock Natural Resources Group--plans to help institutional investors derive new income from their forestry holdings through carbon. "They can outperform by selling carbon credits or undertaking the leasing of lands," says David Brand, managing director of the new company. "Down the road, we'll offer new forest ecological projects, not just carbon but biodiversity and water benefits."
And the nation that is the largest emitter of CO2 in the world seems to have a particular fondness for forests. The US pushed for forestry projects--and market-based mechanisms--to be included in the Kyoto Protocol under the Clinton administration and a host of individual companies and organizations with US headquarters--like The Nature Conservancy and Conservation International--continue to push forestry projects despite the US withdrawal from Kyoto in 2001.
For example, PowerTree (and its predecessor UtiliTree) is a joint effort of several US power companies--among the largest sources of CO2 in the world--to plant trees in the lower Mississippi valley. "There was a loss of millions of acres of bottomland hardwood forests down there since the mid-20th century," explains John Kinsman, director of air quality programs at power industry group the Edison Electric Institute (EEI).
Twenty-five power companies banded together, pooled $3 million, and planted more than 3,600 acres worth of trees to provide new animal habitat and carbon offsets. "We're picking ecologically significant locations," Kinsman says. "We expect there will be some carbon credits to come out of this."
How many exactly depends on future regulation and the hardiness of the trees. But it is a model that many US electric utilities endorse. "PowerTree is a very good model from the standpoint of offering a way off-system to reduce CO2. Plus, it helps the science of CO2 uptake, " says Melissa McHenry, a spokeswoman for the largest CO2 emitter in the US, American Electric Power (AEP). "We've invested about $25 million in terrestrial sequestration."
And, while individual consumers in the US have been slow to catch on to offset possibilities, forestry projects can be attractive to providers for the same reasons as anywhere else in the globe. "There's a strong need for reforestation of degraded areas," says Erica Graetz, program and operations manager for The Climate Trust, an Oregon-based fund that provides offsets to the power sector and individuals. "There's a lot of co-benefits to using carbon money to fund reforestation as far as air, biodiversity and water quality goes."
"But there's a lot of risk associated with it," she continues.
That risk comes from all the threats to a natural forest: fire, insects, logging. But it also comes from the nature of the projects themselves. Trees only absorb carbon slowly over the course of decades and they do nothing to address the root of the climate change problem: the burning of fossil fuels. As a result, offset providers in Europe are moving away from such projects. "Planting trees, to us, is quite a dangerous thing. You cannot guarantee that the trees will still be there in 40 years if there's a forest fire or a logging," myclimate's Moser says. "We focus on [energy efficiency and renewable energy] projects because we need to contribute to a sustainable energy future."
That means that even companies that once had forest in their name, like The CarbonNeutral Company, are moving away from such projects. "Last year, the split between forestry and technology-based projects was about 50-50," says Bill Sneyd, operations director for the Company. "We reckon that within about two years it will be 80% to 20% technology to forestry."
Part of this is driven by the demands of clients. For example, international bank HSBC recently committed to becoming carbon neutral and is looking to purchase roughly 170,00 metric tons of CO2 per year. But none of those tons can come from a forestry-related project.
And in the US, the voluntary carbon market is rapidly becoming conflated with the market for renewable energy credits (RECs)--allowances that are created by wind, solar, biomass, and other renewable generation in various states. Two major consumer efforts--TerraPass, a business school project turned business that aims to offset vehicle emissions, and Carbonfund.org, a nonprofit that has partnered with advocacy group and environmental marketer Working Assets to fund offset projects--source almost half of their offsets from RECs.
Plus, several REC providers--such as the Bonneville Environmental Foundation (BEF) or Native Energy--market their product via carbon offsets. "We call them green tags and we consider the green part to be the fact that renewable power generation causes the CO2 emissions reduction or offset," says Patrick Nye, BEF's director of sales. "It's basically just a way of explaining that buying X amount of green power cuts Y amount of carbon."
"In order to do RECs you have to put it in terms the customer understands," says Tom Arnold, chief environmental officer at TerraPass. "So it's put in terms of [sport-utility vehicles] taken off the road."
Putting it in terms the customer understands is exactly why trees became popular in the first place. And given forestry's potential to promote sustainable development in impoverished parts of the world, many--including the head of the World Bank's carbon finance group, Odin Knudsen--would like to see forestry remain part of the voluntary--and mandatory--markets.
"The Kyoto Protocol is a train wreck for forestry," says CCBA's Niles. "It is a fossil fuel treaty and a plantation treaty. It does not address the core of the problem from a forestry perspective."
"So the voluntary market is very important. It is going to establish whether forestry can be a carbon credit. And that's going to be important to the post-2012 discussion," he continues. "You're never going to get the US involved without voluntary credits."
As a result of this belief, CCBA has developed a standard--backed by prominent non-governmental organizations and companies--to establish standards for good forestry project design and good monitoring. And the offset providers themselves have undertaken measures to ensure the integrity of the market--from the independent scientific review panel employed by myclimate in Switzerland to project auditing under the terms of the World Resources Institute's GHG Protocol on the Chicago Climate Exchange (CCX) in the US.
Given the rapidly expanding opportunity, a growing number of companies--including the verifiers and validators of the CDM world--and organizations are also stepping up with offers to certify the validity of voluntary reductions. For example, the Oregon-based Climate Neutral Network offers its Climate Cool certification to everything from products that are tied to supply chain GHG reductions to offset projects themselves. And the San Francisco-based Center for Resource Solutions is working to certify TerraPass's reductions in an effort to develop certification models--like its Green-e standard for RECs--for the future. "At this point in the industry, credibility is everything," avers Eric Carlson, president of offset provider Carbonfund.org.
If the credibility of offsets developed for the voluntary market continues to grow, market expansion may well be on the horizon. "In terms of overall market potential, we are tapping less than 1%," says 500ppm's Puhl. "There is a lot of benefit in terms of cooperation among offset providers."
Huge market growth may, in the end, justify both forestry and technology based offsets. "The pendulum is currently swinging away from forestry. People seem more comfortable with technology," says The CarbonNeutral Company's Shopley. "Once people understand that there are complex issues related to technology offsets that we haven't really grappled with yet..."
"I'm reasonably sanguine that forestry sequestration will be there."
David Biello is US Editor for Environmental Finance magazine and a freelance writer based in Brooklyn. He can be reached at firstname.lastname@example.org.
First posted: September 14, 2005