Carbon offsetting: is the price right?

A visit to a project in northern Nicaragua run by Taking Root, a Canadian non-profit, offers an interesting insight into carbon offsetting. The organisation uses reforestation as a tool to foster economic development in rural communities while contributing to the fight against climate change: paying communities for the ecosystem services they provide by planting and maintaining trees. Carbon credits gained through Plan Vivo certification — one credit representing one tonne of carbon captured — are sold in the voluntary carbon market. The income generated is passed back to communities responsible for preparing and fencing land, planting trees and maintaining them over the long term.

One of the most satisfying aspects of tree-planting projects for individuals and organisations looking to offset their carbon footprint is the tangible nature of the output. What is far less obvious is the effort required to manage such a project. With the voluntary carbon market largely unregulated, the price of carbon credits has been driven down. While they may be sold to end users at close to $20 per credit, they are now frequently bought from suppliers by brokers and resellers for as little as $6. This may not be a problem for large-scale producers — such as geothermal energy plants — for whom carbon credits are an add-on to core business. But $6 per credit is insufficient when the goal is protecting ecosystems while providing sustainable livelihoods. Taking Root is currently reliant on additional funds and donations to make its financing model work.

One approach the organisation is considering is to broker relationships with businesses willing to pay more for the additional social value the project creates. But why shouldn't we expect more from a carbon offsetting initiative by design? Why is it not built to work harder for poorer communities, who are also the people most likely to bear the impacts of climate change?

The Taking Root project highlights the considerable potential for carbon offsetting to do far more than relieve the guilt of over-consumers or fill the pages of corporate social responsibility reports. But as it stands, investment in carbon offsetting standards and targets has missed an important point. Even in voluntary markets, we need a pricing mechanism that embeds the real economic costs and the social and environmental value of initiatives seeking to deliver outcomes across the triple bottom line. If we are genuinely concerned with meeting both climate change and poverty alleviation targets, the price must be right.