Carbon Dioxide: It's not just for making your Diet Coke fizzy anymore.

I'm going to get all environmental (again) on you today. It's either that or you can read my last post for another couple of days, because frankly, the well is feeling a little dry lately. I think partially because of my worsening health (It's just a cold, I'm sure), and partially because work, family commitments, and this crazy cold and wet spring weather has me less than inspired to write. But I digress.

Show of hands. Who knows anything about the following?

- Carbon credits
- Carbon offsets
- Cap-and-trade
- Global warming*

Oh? What's that? You do know about global warming? Oh, good. So then I can fill you in on the other three (which, admittedly, are related). Let's pretend you are an industrialist of the first order, and you own a factory that makes widgets (I'm an economist, remember?). The process by which you make your widgets releases tonnes and tonnes of pollutants into the air, some of which are believed to be the cause of global climate change. Also, let's assume you live in a country where the government believes humans influence this and can do something about it, and therefore is going to implement emissions targets which will hopefully slow the rate of human-induced climate change sometime in the lifespan of your great, great (oh so great) grandchildren.

And so you're faced with some choices:

1) close up shop and move to India where it's probably cheaper to do business and you don't have to live up to the same government-legislated industry standards.

2) do something about your process of manufacturing, which could involve changing your mode of production to something that emits fewer targeted pollutants*, or

3) continue on as you ordinarily do, but pay someone else to do something about it. Call it industrial guilt-assuaging.

Now, this third point is one of global contention. You'll recall that some 169 countries signed onto and ratified the Kyoto protocol, stating that on average, those countries would reduce their carbon (in this case) emissions to just over 5% of 1990's levels by 2012. I shall not debate the ins and outs of the agreement itself. You're welcome. Suffice it to say that several developed nations remain on the outside of the agreement, and at least one other has ratified but who knows whether that country will achieve their emissions-reduction targets.

I'm taking a long time to make a point here, people, and for that, I apologise. What I really wanted to get at was the list of bullets at the beginning, all of which have to do with #3 above, which is designing ways to reach emissions targets while not really reaching them at all. In essence, you design a market (like a stock market) where industries can buy credits from non polluting industries (or countries which are in no way approximating any sort of dangerous emissions levels like, say.... Myanmar or Tuvalu, and so they'll basically sell off their unused emissions.) This is the idea behind cap-and-trade. You set a cap on the maximum amount of allowable emissions, and if you have extra, you trade. If you need to buy emissions to make up for you inability (or indifference, as the case may be), you purchase those on the market. The idea behind Kyoto would be that overall emissions would be reduced, and so countries and their industries would either have to start paying much more for excess emissions, or actually invest in the technology to lower their emissions. There are other ways of reaching these goals, but that could belabour the point I'm barely even getting to.

But did you know that you could do this in your everyday life? Evidently former American Vice President (and Academy award winner) Al Gore and American Senator John Edwards both engage in what is called "carbon offsetting", wherein they admit to the toll they take on the earth's resources (called an ecological footprint) and so they voluntarily pay some organization to do good things to make up for their own actions. These things could include planting trees or investing in clean energy like solar, wind, or umm... nuclear. These carbon offsetting companies are cropping up all over the place and so there is an associated certification movement mounting.

Where was I going with all this? Oh, yeah. On a listserv to which I am subscribed, I received this gem of a quote from an "investors newsletter". I'll post the link, just so that nobody out there thinks I dreamed this thing up, but it's worth a read anyway:

"CATECHISM CLASS: Raised as good Lutherans back in Ohio, we always understood how the selling of Indulgences helped bring the Catholic Church low in the 16th Century. Indulgences were the pieces of paper sold by the Pope that allowed 'sinners' to pay down their debts they had incurred through sinning. One could sin, buy an Indulgence from the Church, and go about one's life with a sense of having done something worthwhile for the building of more churches AND in curtailing one's time in purgatory or actually buying one's way into heaven. Indeed, we learned that one of the Popes of the age, Leo X, actually sold such large Indulgences, costing such large sums of money, that he was able to finance the rebuilding of St. Peter's Basilica. Having been to St. Peter's, in retrospect, perhaps this was not such a bad idea given the stunning beauty of the church.

"But the whole notion of Indulgences is being revisited these days by the new religion of global warming, for if we consider what Mr. Gore has recently done by buying carbon offsets from those who plant trees to offset his enormous carbon footprint, or knowing what Sen. Edwards has done by buying offsets to the electricity and energy needed to power his enormous home in Chapel Hill, N. Carolina, we are hard pressed to see where this practice differs from the 16th century selling of Indulgences.

"Parishioners in the 16th century bought their way out of Purgatory and/or Hell; 21st century tree-hugging energy users can buy their conscience clear by buying offsets. We look for arguments from our global warming friends out there." Yea and verily.

Source: Dennis Gartman, as quoted by John Mauldin,

So there you have it, people. Straight from the horse's, uh... you know the rest. Questions? Comments? Was any of this news to you? Wanna take me to the mat on the subject of international climate change agreements?

If I've done nothing else (and if you've actually read this much of my blather), maybe it'll give you something to think about next time you're faced with the offer of buying carbon offsets when you book a flight on Travelocity.

*now referred to in many countries as global climate change, since somehow that takes humans out of the general picture when it comes to the blame game.

** Let's avoid naming the pollutants themselves, just for kicks. And because this is about as close as I've been to blogging about work, even though it's not officially my job to discuss such matters for pay.

The part where I reference stuff:

More on Kyoto at Wikipedia and at the United Nations Framework Convention on Climate Change. Text of the agreement is here. More on carbon offsetting at and EcoBusinessLinks.

Posted bythemikestand at 9:19 AM  

10 stepped up to the mike:

Brianna said... 12:17 PM, May 22, 2007  

I've considered buying carbon offsets many times and every time I don't do it because it seems like a racket. I know that in some cases (hopefully most cases) it is not a racket but I don't know how to tell the difference and so I feel like I'm throwing money at a problem rather than solving it. Recycling, reusing my zip lock bags, public transportation -- all of these I can get behind because I see the tangible results. I wish I could find a way to do more that felt productive.

Megan said... 3:41 PM, May 22, 2007  

Hmm, so how do they decide how much pollutants a country can emit (and be within regulations). Is it by size, number of people, amount of manufacturing, what?

SRH said... 8:34 AM, May 23, 2007  

I think at this early stage in actually "combatting" global warming that the purchase of carbon offsets is not necessarily a bad thing. I do agree that is it eerily similar to buying indulgences, but at the moment it is also making people aware of their carbon footprint.

The more people realize how much carbon they individually produce the more people will be willing to make changes. In my opinion, adding a carbon tax to unnecessary amenities would help alternative energy research more than voluntary greenisms. I don't know about Canada, but I sure as Hell know the US won't tax carbon emmissions.

This is why I read here. One day chatting about kids yarfing and the next you go all environmental. Love it.

Mabel said... 9:21 AM, May 23, 2007  

I just don't see how planting trees solves the problem. Unless all the carbon you burn comes from trees. The future has to be clean biofuels. Maybe I'll write something about that sometime. Thanks for the link to the full Kyoto text. It's something I should have read a long time ago.

themikestand said... 9:30 AM, May 23, 2007  

Brianna: I sort of figured you'd feel that way. You are the type of person who needs to know that your choices are valid and useful. I do respect that.

megan: The commission decides on the reductions levels by country. The country figures out how to deal with its industry. Some countreis have moved away from coal fired electrical generation (toward nuclear, usually), as the electricity sector is often the worst polluter. Eventually, the total targets are reduced again and the whole cycle continues.

SRH: I'm with you on this. Anything to raise the profile that something has to be done, and that we're responsible for our decisions. I suppose that is slightly understating my personal beliefs. Taxation is usually the first tool governments adopt, mainly because it serves two functions: it (often) causes a decline in use, and it fills federal coffers.

And thanks for the compliment. It means a lot coming from you. You're welcome here anytime.

mabel: Clean biofuels (and other related technology) is both an answer and a potential problem (food v. fuel debate, anyone?) -- the planting trees is obviously a temporary fix, as when they are harvested, all that carbon is released. Also, the jury is out in some circles as to whether more tree cover actually ~leads~ to more heat retained by the global greenhouse. Hmmm... who said we had all the answers?

cronznet said... 12:26 PM, May 23, 2007  

Amazing and wonderful post. I've never been offered carbon indulgences so will have to research them in order to be ready for the day it finally happens. And to go back to the totally self-indulgent sort of topic, single-malt tasting party at my house this weekend so stop by if you're in town!

wimindance said... 12:57 AM, May 24, 2007  

Interesting post. Thanks for the info.

Did Enron, by any chance, create this market of carbon indulgences? Having studied that debacle with professional interest, it seems right up their alley.

Erik said... 1:22 AM, May 24, 2007  

Nice topic. The concept behind "Indulgence" isn't all that new - its driven by guilt. Its the same thing that gets people to give money to starving kids in Africa and it is an easy way out. Don't get me wrong, I'm not saint and don't travel overseas to help set up sustainable farms. Like most people with a conscience, I reuse plastic bags, recycle, try to give about 10% of my earnings to charity, etc, etc.

Like srh, I agree that anything that raises the profile of climate change at this point is positive. But it is human nature to treat anything that doesn't have a real tangible affect one you as something that is someone else's problem, especially with an issue that is truly global. Look at malaria. Who in Canada gives money to charities for malaria research or treatment? It kills a lot more people than cancer, but I'm sure we all have given more moeny to the Cancer Society or a similar worthy charity. This is largely due, in my opinion, to that fact that everyone knows someone who has lived with or died from cancer. We look to local problems before those that are global because we can only do so much and its easier to see the results when they are in your community, family, etc.

Whoa, that was a tangent.

My point is that unless climate change really affects people where it counts - pocketbook or health - few people will truly take its threat seriously. And I don't see that happening any time soon beause the effects of climate change really won't effect us in the near future.

So, are carbon offsets good? Yes, if they make people money. That will bring more attention to the issue, divert capital from other investments and without this, you will see more industry move overseas to countries who need the money for health care, fodd or to fill the pockets of their leaders (see Nigeria).

Now I'm not sure what point(s?) I made here, if any. So let's call it a collection of thoughts by a guy who is taking a break from work on another 12 hour work day.

quinbot said... 11:02 AM, May 30, 2007  

Regarding your first footnote, I think they're calling it global climate change to try to avoid the argument from the ignorant masses who complain that if the world is warming up, how come they can't wear shorts in the winter yet? The phrase "climate change" is a lot more appropriate considering all the bizarro weather thats been occurring all over the world.

Also, I remember hearing about carbon credits back in high school and that was over 20 years ago, so it's not a new thing. The purpose was intended to help manufacturers along until they financially able to upgrade their plants/factories, but as usual greed took control and the program is now used to weasel out of doing the very thing it was intended to promote.

Karen said... 4:29 PM, June 01, 2007  

Seems like you might have something in common with this guy:

Thanks for the thought provokement.

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