Monday, October 20, 2008

Note to Chicago Climate Exchange: your product quality IS a business concern

Interesting article in today's Wall Street Journal despite its overblown headline, "Pollution Credits Let Dumps Double Dip". It's about potential problems with carbon offset additionality although it fails to use the term.

The particular problem it talks about isn't all that bad - some landfills that decided some years ago to capture outgassing methane for sale are now selling carbon credits. Sounds like it fails additionality until you learn deep in the article that landfills legally required to capture methane can't get credits, leaving only smaller ones eligible. The only time they gave actual money figures was for one system that makes a 3% return on the capture system by selling methane without offset credits, and it's not even clear if that's net of ongoing maintenance costs. Three percent isn't much financial incentive, so I think in most cases the additionality criteria will be met, and the few times it's not aren't very important.

If this constituted the worst scenario for offsets, I'd lose all my caution about them.

On the other hand, there's this part of the article interviewing Richard Sandor of the Chicago Climate Exchange:

Mr. Sandor says the exchange's main goal is to help develop a commodity that has financial value under any possible future U.S. law that to regulates greenhouse-gas emissions. The debate over whether or not a polluter would have cut its greenhouse-gas emissions without the financial incentive of credit sales is "quite interesting, but that's not my business," Mr. Sandor says. "I'm running a for-profit company."

If the product doesn't provide additionality, it doesn't provide value, and I should hope they realize that.

(UPDATE: edited with better link for "additionality".)

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