Do carbon offsets live up to their promise?

1. The cap-and-trade system. Countries that have ratified the Kyoto Protocol, an amendment to the global treaty on climate change, participate in this system by setting a limit, or cap, on greenhouse-gas emissions. Those companies that emit less than their allotment receive credits that they can sell on carbon exchanges. Those that emit more must purchase credits in order to avoid financial penalties. (The voluntary Chicago Climate Exchange also operates this way.) Proponents of this system trust the innovative power of the free market to promote energy efficiency.

2. The voluntary carbon market. In the United States, the market for carbon offsets is voluntary, driven primarily by corporations seeking to enhance their brand identity or to familiarize themselves with what they consider to be an inevitability.

Many offsets sold on this market are what Ricardo Bayon, director of Ecosystem Marketplace, a San Francisco-based information provider on ecosystems services, calls "gourmet." Their value lies not in the compliance, but in the prestige of achieving carbon neutrality. At first glance, this type of offset appears more straightforward: A consumer pays for a carbon-removal service.

Dig a little deeper, however, and it gets more complicated. There are many ways to remove carbon from the air, each operating on a different time scale and all of them of different "quality." You can capture greenhouse gases by planting trees. You can also prevent greenhouse gas from entering the atmosphere by burning methane released from animal manure and landfills. (As a greenhouse gas, methane is 23 times more potent than CO2.) Or you can preempt its release by building alternative-energy sources such as wind- and solar-power devices.

Compounding an offset's inscrutability is its intangibility. Unless you're willing to visit Uganda in 20 years to verify the existence of a new tree, a carbon offset is arguably invisible. "The carbon market is particularly difficult because of that issue," says Mark Trexler, president of Trexler Climate + Energy Services in Portland, Ore., the firm commissioned to author Clean Air-Cool Planet's (CA-CP) guide to carbon offsets. "You're dealing with stuff in the future in many cases that hasn't happened yet."

CA-CP's "A Consumer's Guide to Retail Carbon Offset Providers" attempts to wrangle a semblance of order from what one industry insider calls the "Wild West." It ranks offsetting companies on factors like transparency, third-party certification, their efforts to educate consumers, and how well they prove they're not selling the same carbon offset more than once.

CA-CP's ranking effort is the first in what's likely to be a burgeoning industry effort at standardization. Two San Francisco organizations, Business for Social Responsibility and Ecosystem Marketplace, recently joined forces to write guides on the voluntary carbon market, and Ecosystem Marketplace is about to release a book on the topic. This spring, the Center for Resource Solutions in San Francisco plans to release a certification standard it hopes will be universally adopted.

Central to the CA-CP report – and to the debate on how to gauge an offset's quality – is the topic of "additionality." Additionality is determined by answering a deceptively simple question: Would a project have happened anyway? If yes, the offset cannot be said to have additionality. If no, then it qualifies as a true offset. Simple – except that no one agrees on what could have happened.

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