The Offset Theory --- Part I

Dear readers, You worry about climate change or you don't !!! The concept of emission offset has been a rage in recent media coverages and news reports related to efforts on climate change. In this post I shall try to discuss out what offsetting means. In the next post i.e. Part II, we can discuss intricacies involved and how to ensure that offsetting is actually some thing real !!!!!

A list of Carbon offset providers is compiled at Eco Business Links where in comparison is also made on per tonne price of CO2. It goes as high as 30$ (where does that come from). Some of them may not be listed on this link.

What exactly is Carbon Offsetting?
Step 1: The green house gas emissions from a particular activity, service, events are calculated using various assumptions in a conservative manner. (Estimated to a higher side)

Step 2: These many emissions will be nullified by participating in a project activity which is reducing emissions. ( I know this is confusing let me try to explain this)

Lets say you are going to do an 'Activity - A' using certain set of technologies and processes or methods lets name it 'Approach -1'. (Like most possible approach to do this 'Activity A' in given conditions).

Now through some special enhancement in the process, technology etc. the way of doing things change and new approach is say 'Approach -2'.

Now Emissions ('Approach -1') > Emissions ('Approach -2'), this has to be true to claim emission reductions.

So emissions achieved in changing approach to do an 'Activity - A' becomes:

ER (emission reductions) = Emissions ('Approach -1') - Emissions ('Approach -2')

Now comes the part where your money comes in. Lets say the above equation results in about saving 100 tonnes of Carbon dioxide (CO2). now an estimate can also be made on difference of investment or return from 'Activity - A' to calculate extra cost gone into changing approach:

Extra cost = Investments + Returns ('Approach -1') - Investments + Returns ('Approach - 2')

Now this extra cost depends on so many factors like type of activity (change in fuel pattern, use of renewable sources for power, change in technology etc.), place of activity and any specific constraints for that project.

So coming back to Step 2, you actually buy carbon credits i.e. emissions reduced from this 'Activity -A' and nullify the emission you made in Step - 1.

From this we assume that cost of each tonne reduction of CO2 should be

Extra Cost / 100 tonnes of CO2 ( for this particular case as described above)

But believe me you might be ending up paying a lot more than that for each tonne.

So now we know how you can offset some or many of these:
Emission from air travel
Transportation i.e. fuel usage.
Big events, conferences. (That thing is in fashion)

Its happening

The recent developments
IPCC report.
500th CDM project registered.
Carbon credit Exchange in china.
my observation - a huge jump in intensity of articles related to climate change and Kyoto.
The number of articles with some critical views on Kyoto and CDM have also risen in numbers. Last two days I saw two of them; Crib over HFC -23, CDM is useless in business standard. I tried to discuss the issue of HFC23 on orkut forum and my dear friend Manpreet Singh summarised it very clearly

"The fact of the matter however is that HFC is a major green house gas with an enormous Global Warming Potential....So need to curb those emissions anyway....if not through CDM then i guess by law....just like Montreal banned CFCs...Kyoto or another new protocol should ban release of HFCs without thermal oxidation in refrigerant industry.....CDM gave an incentive....a huge incentive for these guys to curb these emissions.....so it might have resulted in a flood of carbon credits but the fact is those emissions have been minimised....There could have been ways to actually cap the credits from such projects in order to give them only the incentive that they deserve and not become a free rider....."

The point is very clear, the CDM board is constituted by learned people from different spheres and every methodology undergoes various stages of check and revisions before becoming eligible for use by project proponents. Moreover all these methodologies are open to discussions and clarifications. So the people who crib about this should learn that global warming is reduced by lowering such emissions.

Although I do agree with portion of second article which says, the need is to redesign CDM so as to see where can it e used effectively for actual development. Although we need not take any emission targets in near future, developing countries have been emitting decades before we even started any considerable fossil firing. There definitely is need to structure a policy to enable justified usage of carbon generated funds.

Why not India?

I hope most of you came across news articles such as these "China to set up Asia's first carbon-credit exchange", which made waves a few days ago.

The whole thing will be estalished by financial backing from Arcelor Mittal. The moment I read this the first thing that came across was why not India?