FTC and carbon offsets

Currently the carbon offset market functions on an entirely voluntary basis. Even so, it is growing at an incredible rate. According to the August, 2007 State of the Voluntary Carbon Market report by New Carbon Finance, a carbon market analyst and advisory firm, the number of organizations selling carbon credits into the marked has increased by 200% since 2002. In 2006, some 23.7 million tons of CO2 equivalent were traded in the voluntary markets. There are various ways to quantify carbon offsets, and there is also uncertainty about the efficacy of different methods. For this reason, and amid growing concerns that consumers are actually getting what they pay for and that offset projects aren't double-selling credits, the Federal Trade Commission has been looking into ways to regulate the market. The FTC held a conference in early January to discuss these issues, but so far, no new 'green guides' have come out.

In an effort to press the issue, the Attorney General's Offices from 10 states issued a request for the FTC to take the following steps in hopes of preventing fraud in the carbon market: 1) research on consumer perceptions of what carbon offsets are, 2) commission research into the efficacy of disclosure, or labeling (the AG's suggest putting a "carbon facts" box on marketing materials), 3) consumer education encouraging reduction of emissions, and guidelines for purchasing offsets, 4) require substantiation of projects, including evidence for permanence of projects, no double-selling of offsets, no selling offsets for projects that are undertaken for compliance with existing laws, evidence for no increase in emissions elsewhere as a result of project, and scientific evidence for the quantity of carbon offset (scientific evidence, as defined in the FTC's green guides). A statement and a copy of the letter can be found at the Vermont Attorney General's Office website.

Carbon offsetting is growing into a multi-million dollar market, and as such, it is in desperate need of regulation. As mentioned above, quantifying and verifying offsets is sticky business. For example, planting trees is a common carbon offset mechanism. Reforesting areas that were previously subjected to deforestation is one way to draw down atmospheric CO2 through photosynthesis by trees. The problem is that if that tree burns or dies and decomposes, the CO2 it once took out of the atmosphere is put back into the air. Another potentially negative implication of this practice is for biodiversity. Some tree plantations are being planned for areas that have never naturally had forests. Also, many plantations are only reforested with one type of tree for potential future use in logging or biodiesel production, and these monoculture tree farms can have serious impacts on biodiveristy.

Let's hope the FTC gets down to business and provides the carbon market with some rules and regulations as well as providing consumers with guidelines to navigate this complex arena.