Firms warned offsetting does "more harm than good"

A leading scientist with the Tyndall Centre for Climate Change Research has warned that "doing nothing is better than offsetting" on the grounds that there is a serious risk that the practice is leading to increased emissions.

Dr Kevin Anderson, an academic at the University of Manchester and energy programme leader for the Tyndall Centre, said that the failure by many offset firms to look at the wider implications of investing in carbon reduction projects in developing economies meant that they were guilty of inadvertently increasing carbon emissions.

"Many of these schemes are not accounting for the economic multiplier effect of the offset investments," he said. "For example, if you take one popular offset project in the form of donating low energy bulbs to a Jamaican hotel you have to ask, what is the full impact of that investment? Electricity in Jamaica is expensive, so what does the hotelier do with the money he saves? He may use it to pay for a flight for himself or he may invest in extending the hotel, both of which could cancel out the initial emission reductions."

Anderson argued that there is no way that offset providers can guarantee that their investments will not spark significant multiplier effects that would ultimately lead to increased emissions.

"Such multipliers are the whole point of economic development, so if you want to invest in development that's fine, but if you are investing in offsetting emissions you need to be certain that your investment does not lead to an increase in emissions," he said. "And you just can't give that guarantee, particularly when you consider that a lot of the offset projects are based on assumptions about emission reductions taking place over 100 year time periods."

Anderson said that the Environmental Audit Committee's recent report recommending that the carbon offsetting industry could play a major role in tackling climate change failed to sufficiently account for multiplier effects and as a result businesses would be wise to ignore the report's advice and avoid offsetting schemes altogether.

However, David Wellington, director at leading offset provider Climate Care, rejected Anderson's analysis claiming that offsetting best practices did indeed account for multiplier effects. "We refer to it as leakage - the effect the project will have on other aspects of the economy – and it is well accounted for in the Kyoto Protocol and the Clean Development Mechanism's (CDM) checks and balances for assessing a project's additionality," he said.

He added that all Climate Care's projects were either qualified under the CDM or mirrored the CDM requirements.

Wellington also argued that it was "ludicrous" that Anderson was attacking offsetting when the multiplier effect applies equally to many other emission reduction investment. "It is a nonsense to imply this issue is unique to offsetting," he claimed. "There are many emission reduction schemes that have the same problem because if they help people save money they will spend that money elsewhere on things like food and education. To suggest it means that you should not offset is frankly ludicrous."

However, Anderson rejected Wellington's criticism arguing that the idea that the CDM legislation tackled the problem was "at the best highly misleading". He added that the central problem remains that CO2 emissions from a car journey or flight will typically remain in the atmosphere for 100 years meaning there is no way offsetting providers can be sure their investment does not lead to an increase in emissions at some point far into the future.

"Wellington's crystal ball must therefore be up there with Harry Potter's if it is to estimate with any level of certainty the economic multiplier over many decades," he said. "Wellington's ball would have been able to predict Concorde, the Space Shuttle, Satellites and Mars probes etc at the time of the Wright brothers - as well as their carbon implications."

Anderson added that while the problem also applied to other emission reduction investments that provided no reason not to address the issue. He argued that the only way to counter the multiplier effect and make carbon offset schemes more secure would be to place emission caps on any country receiving offset investments.

Furthermore, even if offsetting schemes were 100 percent reliable Anderson maintains that they would not be desirable on the grounds that they would remove the incentive to innovate new low carbon technologies. "For example, a tenner on a flight from London to Rome is not going to put us off flying - and hence there is no market signal for improving the train service or changing our attitudes," he explained. "In the meantime, we build more capitally expensive airports and runways and buy more A380s and Dreamliners - all which lock us in to high emissions travel for many years to come and absorb capital that could otherwise be spent on alternative low-carbon options."

This analysis is again contested by many advocates of offsetting who argue that by adding cost to carbon intensive activities offsetting actually creates a greater incentive for innovation in low carbon technologies.

Anderson also rejected Wellington's suggestion that his opposition to offsetting could be perceived as an opposition to carbon emission reduction and economic development projects, arguing that he was critical of the offsetting funding mechanism and not the many "carefully conceived and monitored" emission reduction projects they involve.

"These developments should be funded as reparations, not as aid," he insisted. "It is us who have brought about the position whereby these countries cannot develop along the carbon profligate route we - unknowingly at first - proceeded… I would argue we have moral imperative to assist these countries - but not as a mean of buying indulgencies."