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There's a Gold Mine In Environmental Guilt
At the Chicago Climate Exchange, where offsets are sold like pork bellies or stocks, Sept. 23 was the second-busiest trading day in the four-year history of the market. This year, the price of an offset on the exchange surged and then plummeted back to late 2007 levels. But analysts say the spike seemed attributable more to factors internal to the exchange than to any slackening in overall demand.
In Arlington County, the Conservation Fund, which markets offsets directly to buyers, reports that sales this year have increased 9 percent to individuals and 22 percent to companies. New Carbon Finance, a research firm, found that prices in direct-to-customer markets have climbed 26 percent since last year, from $5 to $6.32 a ton of greenhouse gas. And that's essentially a wholesale price. Many individuals might pay more.
The rising prices make offsets a better investment than General Motors (down about 60 percent during the same period) or even Exxon Mobil (down about 16 percent). For once, cleaning up pollution seemed to be a better investment than making it.
The increase was driven in part by the demand from corporations, which bought an estimated 80 percent of U.S. offsets last year. They snapped up offsets to practice trading in carbon in case the United States requires polluters to reduce emissions or pay for the privilege of polluting.
And, of course, they also did it for image.
"This is an issue that a lot of people care about," said Christina Page of California-based Yahoo!, which spent about $2 million to offset emissions from its electricity use and from employees' commutes and air travel. One motivation was marketing, Page said. "It does attract people," she said.
But individuals and small nonprofit groups bought offsets without any hope of a bottom-line boost. For them, the benefits must be psychological, moral.
"It does cost money, but -- not to be cavalier about it -- I don't care," said Paul Emerson, whose nonprofit group CityDance Ensemble pays $65 a month for offsets, money it would have spent to subsidize employees' commutes to downtown Washington. "If we're going to say that we care. . . . We're going to do it whether it's easy or it's hard."
Experts who study offsets say a cultural shift is at work, in which the American public has become accustomed to feeling guilty about climate change, and, instead of writing letters to members of Congress or donating to an environmental group, they have learned to buy their way out.
"What people liked about offsets is that it allowed them to feel like they were in control," said Jonathan Isham, a professor at Middlebury College in Vermont. Offsets are perhaps the purest expression of the impulse, experts said, because hybrid cars and energy-saving light bulbs save buyers money in the long run.
But people in this business are worried that the guilt boom is about to bust. Most of their customers -- usually college-educated and making more than $50,000 a year -- have not been hit hard by the weakening economy. Yet.
"People still come to the site, but where you used to get people signing up [for offsets] every day, now you'd be lucky to get a few people a week," said Fred Weiss, a small-time offset seller based in Ann Arbor, Mich., who sends customers stickers that say, "Carbon Neutral Vehicle." Apparently that isn't as important now.
"Who cares about the environment? Am I going to have a house next week?" he imagined would-be customers saying.
If the market does shrink, offset sellers said, the environment will suffer. But the business is murky enough that it is hard to say how much.
In the western Virginia town of Christiansburg, the operators of a landfill sell carbon offsets tied to a project that captures methane, a powerful greenhouse pollutant, and burn it in a tall orange flare. They've made $43,000 on the Chicago Climate Exchange in just a couple of months.
But that project was put in long before the offsets were sold and for a different reason: to keep dangerous gases from accumulating in a capped landfill. So if the offset market dried up completely?
Nothing would change.
The money "is gravy to us right now," said Alan Cummins, executive director of the regional authority that runs the landfill. Even without it, he said, "we would always continue to flare."