TerraPass goes to Washington

I was on Capitol Hill yesterday, testifying in front of the bipartisan House Select Committee on Energy Independence and Global Warming, chaired by Rep. Edward J. Markey (D-MA), and including Ranking Member James Sensenbrenner (R-WI) . Here’s a quick run down of the session. It was a great opportunity for us to speak directly with our elected representatives about things near and dear to our hearts here at TerraPass, and some things that I suspect matter to a great many readers of our blog as well.

TerraPass was the only company asked to testify that focuses primarily on helping consumers buy carbon reductions. The other companies represented were NativeEnergy, a project originator that also sells offsets to businesses and consumers, and Planktos, a project developer we’ve blogged about in the past. The panel also included two respected experts in the climate change field, Joseph Romm of the Center for American Progress and Derik Broekhoff of the World Resources Institute.

The main thrust of our testimony was this: the voluntary carbon offset market will work better for everyone involved if all the market players, including the federal government, can agree to implement and enforce a definitive set of quality and consumer protection standards. TerraPass customers are a hardy lot who can do their own research and conclude for themselves that we only sell high-quality carbon reductions. But the whole point here is to generate a lot of carbon reductions, so we can actually have an impact on the climate change problem. That means we need offsets to become a purchase that doesn’t require much research (as easy to buy as, oh I don’t know, a tank of gas maybe?). And the only way to accomplish that is with standards that are broadly accepted and understood.

The industry is making good progress towards this end, though there are still too many standards, and too little understanding of them. But with concerted effort on the part of everyone involved in the voluntary carbon offset market, and a stamp of approval from the government, we’ll get there.

For those interested, here are the main questions put forward by the Committee, with a brief summary of our answers. If you’re really interested, you can also read the full written testimony (pdf).

1. What is the nature and scope of your company’s business in the voluntary carbon offset market? Specifically, what kinds of projects does your company undertake, what is your business model for selling offsets, and what is the magnitude of your offset business?

To date we’ve sold more than 65,000 TerraPasses, representing 175,000 metric tons of carbon reductions. We sell them at a mark up to their wholesale price, and use the difference to support our business and keep us on a path to breaking even within the next few years.

2. What does your company do to ensure the environmental integrity of the offsets you sell, and how would you characterize the overall quality of the offsets being sold into the U.S. voluntary market today?

We subject each of our projects to a rigorous quality screening process, with attention paid to five different levels of our operations.

First, we enforce project-level quality using a combination of existing industry protocols and internal review. Wind projects are certified under the Green-e program of the non-profit Center for Resource Solutions (CRS). Dairy Farm Methane is certified by SES, and Landfill Gas Flaring is certified by First Environment. These latter two project types are also registered with the Chicago Climate Exchange (CCX) to avoid double-counting of credits, and must produce verification reports for acceptance by the CCX offset committee.

Second, at the portfolio level, TerraPass employs a matched maturity model, meaning that all offsets we sell are generated in the same year as the consumer purchase. This approach disqualifies most tree-planting projects and most projects whose carbon accounting extends into the future.

Third, TerraPass believes in disclosure and has always listed on our web site all projects that we support, as well as the date, source and tonnage of every carbon transaction we execute, a practice which we believe to be unique in the industry. As well, every product we sell comes with a Product Content Label (PCL) that lists the amount and source of the offsets, and provides consumer protection disclosures.

As a fourth layer of quality enforcement, TerraPass submits to an annual audit by the non-profit Center for Resource Solutions to assure that our carbon purchases match our customer obligations.

Finally, to ensure we are making responsible marketing claims, we require that most marketing literature for both TerraPass and TerraPass marketing partners is reviewed by the Center for Resource Solutions.

3. How can we ensure that individual consumers and companies that purchase carbon offsets are getting what they pay for and that offset projects have environmental integrity, with regard to both climate and non-climate effects? Are industry standard-setting initiatives adequate, or is there some role for government regulation? If so, what form should regulation take?

In our written testimony, and in the question and answer session, I repeatedly made the point that the really important government regulatory step is the one that puts in place a mandatory cap or brake on American emissions. With regard to the offset market in particular, we believe our approach is robust, but also believe the time is right for the development of a consumer protection standard in the retail voluntary carbon offset market. We encourage the appropriate agency of federal government to play an active role in that standard-setting process, as a stakeholder in existing standards development efforts, and as a leader in subsequent efforts.

4. What is the future of the voluntary offset market, and how significant a contribution can that market make to mitigation of climate change?

We believe the market will continue to grow as more and more Americans and others come to appreciate how easy it is to make a difference in the fight against climate change. The market will continue to generate immediate reductions in carbon dioxide emissions, but also has the potential to serve as a laboratory for policy innovation, at no cost to taxpayers, and to give businesses and individuals experience working with carbon markets

The question and answer portion of the hearings featured some lively discussion of forestry projects as a valid offset category (we don’t sell trees, but it was fun to watch the fireworks), whether the Planktos idea of seeding the seas with tons of iron to promote algae blooms holds water (sorry), and, as mentioned above, a universal, oft-repeated plea for offset quality standards, so that offset buyers and sellers alike can approach the market with more confidence. A stakeholder-based process that results in a government-backed standard – it’s what we all need and want, and after today it seems a whole lot more possible. I and the whole team at TerraPass wish Chairman Markey and the Committee all future success.