California’s carbon-credit market questioned
On a dairy farm in California’s Central Valley, Wesley Patterson squinted under a dusty baseball cap as he explained, over the roar of its natural gas-burning engine, the advantages of installing a methane digester.
He pointed to several football-field-sized ponds of cow manure covered in industrialstrength tarps. The methane coming off the animal waste is trapped, he said, and sucked into a generator that creates more than enough power to run the 4,000-cow operation.
“It’s basically like solar, but we make power all the time, and we don’t have to use five acres of land for panels,” said the 27-year-old diesel mechanic. “Saving money is making money.”
The project also generates revenue by selling carbon-offset credits through California’s cap-and-trade program — part of the state’s ambitious plan to reign in greenhouse gases.
Under the offset program, everyone from dairy farmers trapping methane to timber companies embracing progressive logging practices to nonprofits preserving natural landscapes can sell carbon credits and get paid for their efforts to fight climate change.
Industrial polluters purchase those carbon credits to claim the ton-for-ton reductions in climate-warming emissions as their own. They use the offsets to stay in line with the state’s strict environmental regulations, or voluntarily, to green up their public personas.
However, reporting by the San Diego Union-Tribune has revealed numerous instances where companies and nonprofits selling offsets didn’t shrink their carbon footprint as a result of the program — raising questions about the ability of the program to fight climate change.
In some situations, groups maintained green business practices that long preceded the offset program, but qualified to sell credits by pledging to continue those activities for decades to come. In other cases, companies received checks for reducing their emissions but were largely motivated to green up their operations by other financial factors.
“It’s worked out pretty good for us,” said Greg te Velde, a dairy farmer outside of Tulare who has been collecting money from carbon offsets for a digester he installed two years ago. “It really was a no brainer.”
Half of the roughly $2.5 million startup cost for the project was covered by a U.S. Department of Agriculture grant, he said. The annual savings on electricity has made the investment worthwhile, he said, while the carbon credits pad revenue with an additional $200,000 a year.
And this diary farmer is no outlier. The contractor who installed the digester, Daryl Maas, owner of Maas Energy Works, said that carbon credits are often an afterthought when deciding whether to invest in the alternate power source.
“The carbon credits are a very nice bonus, but the bulk of what we do is power generation,” Maas said.
Proponents of the credits, including the California Air Resources Board, acknowledged the situation in several recent interviews with the Union-Tribune, saying that the current approach does reward some businesses regardless of their underlying motives. But given enough time, they argued, the carbon credit program has the potential to shift industry-wide practices.
“If you can show that you’re doing these activities as of these dates forward, you are eligible to get offset credits,” said Rajinder Sahota, a top official with state air board.
“It’s not about what would’ve happened in one project,” she added. “It’s really how much more can we expand (these practices) to other regions.”
California’s cap-and-trade program kick starts carbon offset market
Following California’s 2006 landmark climate change legislation Assembly Bill 32, which mandated a reduction in greenhouse gases to 1990 levels by 2020, the air board developed the state’s cap-andtrade program.
Under the program, regulated businesses must buy permits, often called allowances, for each ton of greenhouse gas they emit. For example, an oil refinery that emits a million tons of greenhouse gas would be required to purchase a million allowances.
The state’s program is designed to ratchet down over time the total number of allowances available, thus capping emissions at ever-lower levels. Regulated industries — including refineries, investorowned electric utilities, natural gas producers and other heavy emitters — represent 80 percent of the state’s greenhouse-gas emissions.
Money collected by the state from the cap-and-trade program is required to be spent on projects intended to reduce greenhouse gases, from rebates for electric vehicles to fire prevention to Gov. Jerry Brown’s high-speed-rail project.
As part of the cap-and-trade program, regulators allow businesses to purchase carbon offsets — in lieu of allowances — for up to 8 percent of their total emissions.
Officials said that carbon offsets are intended to limit the program’s financial burden on industry and prevent economic shock waves from rippling through the economy. Offsets sell today for roughly $10 a ton, while allowances go for around $15 a ton and are expected to become more costly as the state ratchets down the cap.
Rather than set up its own carbon-offset marketplace, the state facilitated the development of a nonprofit registry, originally called the California Climate Action Registry.
Today, it’s known as the Climate Action Reserve, and it’s one of a handful of registries that act as online storefronts connecting buyers and sellers of offset credits.
“The main reason for offsets is to lower that cost of the (capand-trade) program,” said Craig Ebert, president of the Climate Action Reserve. “It’s a price safety valve.
“Companies like an electric utility can pass along a lot of those costs to the customers, and we don’t want electric bills to skyrocket in the state,” Ebert added. “So offsets help minimize that pressure. It’s cost containment.”
At the same time the carbon registries also spawned a voluntary market aimed at businesses and individuals looking to reduce their carbon footprints. Companies such as Microsoft, Coca-Cola and UPS have embraced carbon offsets, along with other investments, as a way to green up their corporate images.