We believe that offset projects will help stop climate change. We also believe in a transparent market. The best way for money to flow to the most effective offset projects is to have the market to decide where to invest. When information is available the projects that bring the most benefit to the environment receive the most funding. 

Opaque markets cause perverse behaviors. Even when someone wants to do the “right” thing their investments can be directed to inefficient projects.

We met last week with Environmental Synergy Inc (”ESI”) a forestry specialist who helps to “promote carbon sequestration through the restoration of natural forest ecosystems.” They help organizations buy land jointly with them. Then ESI plants trees on these lands. According to their website, ESI has planted 23 million trees and created 25 million metric tons of CO2e offsets over the last nine years.

ESI works with offset providers to identify land that can be used for offset projects. They service the land and the provider sells the offsets to voluntary and [potentially] compliance buyers (when that model comes into effect). The land is put to use while accruing benefits for the environment and wildlife. The fact that these benefits can be sold helps finance the purchase. The forests created last for 100 years.

This model is great and long term. This explains why ESI often works on land sold from the government including the U.S. Fish and Wildlife Service. It also works with NGOs. All these entities are terrific for long-term project development and reducing GHG emissions. We applaud their efforts.

Trouble is inevitable when looking at long-term value in a commodity market. In order to use CO2e trading to support this type of project the price per metric ton needs to go above your cost basis. When creating a 100-year project there are going to be down turns in offset prices. Apparently, projects that were done over the last few years are now under water. When the prices rise everyone is happy; but when it drops there can be a big hole. Add to that the net present value of the project and now we see why the project sponsor needs to sell at a higher off-market price.

What has happened is that some well-intentioned companies bought land, grew trees on it and now have to sell the first credits to repay themselves. Meanwhile, many more cost-effective offset projects have entered the market, which are sustainable at only $2.00 a metric ton. Would we like market prices to go up and support more projects? Of course. There are no “bad” projects as long as they are verified and certified by the Chicago Climate Exchange. Some projects are just more cost effective than others.

Clearly we have to act fast to combat global climate change. In this economy, we must support projects that are the most effective at reducing greenhouse gas for the dollar.

I remain shocked by the carbon offset market. Real projects, certified, verified and registered carbon offset projects are being sold on the Chicago Climate Exchange (“CCX”) for $2.10 per metric ton. However, the difference between wholesale and retail remains large. Offset providers have overhead and need to answer to it. Projects need certain funding levels to justify their existence.

Verus Carbon Neutral has a price that moves with the market. Currently we retire offsets at $2.58 per metric ton. We have the lowest published prices in the world. Businesses, individuals and entities can confidently offset their footprint at these levels knowing our offsets have been verified by the CCX.  Call us, we do it every day.

On the other end of spectrum are the highest-cost providers. Topping Carbon Catalogue’s list of North American providers is a project at $29.40 per ton. Why so high? Hard to tell.  They offer wind power and solar power projects that do demand a higher premium, but not a 1004% premium. They have some videos on their websites but a metric ton = a metric ton. They are non-profit, which makes the question even more difficult. Worse are companies that offer offsets at $18 and decorate their sites with pictures of little children and sell offsets but don’t say what the projects are or where they come from.

Incredibly, there is a company that charges $25 per metric ton for a Chinese Wind Power project. To put this in perspective another has a Chinese Wind Power project which they sell for $16.96 per metric ton. Why overpay for Chinese project when you can buy US wind power for less?

Carbon Catalog uses a check mark system to rate offset providers. Verus Carbon Neutral proudly sports six check marks (out of eight possible). There are only four US providers that get seven check marks and they charge between 5 and 13 times more than we do. We do not get check marks for “on-grid power” as many of our projects are not renewable energy (although some are) nor do we quantify how much carbon is offset by each project. These two issues are related to the fact we retire all our offsets through the CCX and therefore cannot identify all the projects on our website.

I received a correspondence from a competitor who said, I must sell at higher levels because I owe it to our investors. What do you owe to your customers or the environment?