Look at us, everybody! We’re in Salon!

salonstory.jpgWe don’t make a habit of linking to press mentions of TerraPass, but Katharine Mieszkowski’s article in Salon on the consumer carbon offset market is recommended reading. (Salon requires a subscription, but you can read the article for free if you agree to watch a short ad.)

The lengthy piece skips right past the usual red herrings, such as carbon offsets as indulgences, and instead digs into some of the meatier but more arcane issues around carbon markets.

For example, the article is one of the first that touches on the issue of quality in the consumer carbon offset market place. Our industry is like any other — you can find offerings available at many different points on the spectrum of price and quality. If you want to ensure your purchase has an impact, third-party verification matters, and the source of the offsets matters.

(One minor quibble — the article states: “To back up their own research, carbon-offset groups hire nonprofit, third-party auditing firms.” As far as we know, TerraPass is the only company to do this.)

Carbon offsets are sold by the ton, buy they’re not all are created equal. For example, offsets generated by planting trees, while highly appealing from a marketing perspective, are problematic from an environmental perspective. It’s very difficult to quantify or guarantee the carbon reductions from these projects, which is why TerraPass doesn’t fund them.

And the article gets into some truly deep weeds in its discussion over who should be able to claim the environmental benefits from wind energy — the wind farm that produces the energy or the utility whose coal-powered energy is displaced.

It would be easy for a layperson to come away with a sense of despair over the complexity of some of the issues facing the nascent carbon industry. This would be a mistake. We’re in the early stages of evolution of what will eventually become a widespread movement, and it is fitting that the industry is now wrestling with basic questions over standards and procedures. Every movement starts this way.

Anyhow, read the article and let us know what you think. The comments section is open for any questions about how TerraPass addresses the issues raised in the article.

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  1. Anonymous - May 31, 2006

    Does Terrapass purchase any Renewable Energy Credits from renewable energy that feeds into a grid operated by a Chicago Climate Exchange utility company? The utility can not sell the REC generated from the wind farm, if the wind farm sells the utility the energy but not the rights to the REC, but the utility may be able to increase it’s effeciency through purchasing the wind power and can sell that increased effeciency as a CFI on the CCX platform. That would lead to double counting without any intentional deception, as far as I can tell. What does Terrapass or Green-e do to directly address this problem that the Salon article briefly mentioned? Thanks.

  2. tom - May 31, 2006

    In short, no. We don’t buy from any CCX registered utility companies.

    Let me rephrase the hypothetical issue. Let’s say that a wind farm, supported by TerraPass, is successful in displacing energy from a local coal-fired plant. TerraPass makes an estimate, based on Green-e methodologies to estimate how much carbon was avoided by the new renewable energy. So far, so good. But if that coal plant is a member of the CCX, it could theoretically also count the reduction attributed to the REC simply because it made less electricity. This would be an instance of double-counting, and we, Green-e and the CCX would have a problem.

    Some considerations for everyone to chew on:

    1) Right now, this problem is strictly theoretical, for two reasons. The first is that wind power is actually reducing the growth in demand for coal-fired energy, not reducing the absolute amount of demand for coal-fired energy. So coal plants are not dropping below their emissions baselines, and therefore can’t claim credit for any reductions.

    The second reason this problem remains theoretical is that only a handful of power companies are on the CCX. AEP is the only major one, and we buy RECs from small wind farms that are all outside AEP’s territory.

    2) CCX is fully aware of the issue and reviews both renewable energy providers that opt into the their reporting scheme and the effect of out-of-system renewable energy on allocation allowances. More protocol work is required, but we feel there is good progress underway.

    3) CRS (who runs Green-e) is also fully aware of the issue and is working to understand the implications for RECs. This is especially true as the vision of a regulated market, a healthy voluntary renewable energy market and a emerging voluntary carbon market converge.

    4) This is not a terribly difficult problem to solve in the long term. Power company reductions simply need to be calculated on a net-of-renewables basis. The problem of course is that would necessitate at the very least data sharing between the renewable energy world and the carbon credit world, which is difficult given incentives, budgets, etc.

    We continue to monitor the issue and help drive it forward but don’t believe it is a material problem at this point.

  3. Anonymous - May 31, 2006

    I guess it looks to me like the beauracracy surrounding the “double-counting” issue would make it almost unmanageable unless “REC”-like credits came directly from the utility companies in which the power was being distributed. Measuring reductions made from outside the grid seems more complex than it would be worth to regulators. I suspect these RECs will be valueless once federal legislation is passed because all reductions will be measured in terms of the utility company alone. Maybe there is something I don’t uderstand about your suggestion to calculate on a “net-of-renewables basis” that would help me understand how such regulations and monitoring would not be a “terribly difficult problem to solve in the long term.”????

  4. tom - May 31, 2006

    You raise an interesting point and in many ways your comments reflect an industry divide that was clarified at the recent GreenT Forum. We’ll probably expand this topic to a full blog post, but here is the shorthand of how it breaks down.

    Camp A believes that this potential double counting from RECs means that RECs should be excluded from a regulated market. The regulated market is what we are all aiming for, and therefore we should exclude RECs from voluntary markets because of a difficult transition.

    Camp B believes that the integration of direct and indirect offsets is an issue to be worked through and that any regulated solution must preserve the voluntary market (which we estimate at about 20 million tons). This voluntary market is growing very quickly and doesn’t expend any political capital to achieve material reductions and the awareness benefits that accompany them. The voluntary market is mainly satisfied through RECs today and certainly will be heavily biased to clean energy development, and therefore RECs. The challenge for policy makers aiming at future regulation then, is to amplify the benefit of a regulated economy by making sure that exisiting popular voluntary mechanisms flourish in a regulated world.

    TerraPass, in case there was any doubt, is part of camp B.

    PS: Its helpful to tell us your name at least in comments so other readers can refer to “Jane’s” point rather than anonymous.

  5. Craig - May 31, 2006

    Thanks, Craig.