December 13, 2006 9:19 AM PST

Cashing in on carbon guilt

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Pollution penance isn't just for heavy industry anymore.

This year, several Web-delivered services emerged that are designed to reduce an individual's environmental impact on the planet.

Called carbon offsets, these programs are meant to appeal to people concerned about climate change that stems from greenhouse gas emissions.

Service providers invest consumers' money in environmental projects, such as renewable energy research or forest conservation, with the goal of counterbalancing the carbon dioxide generated by a subscriber's energy consumption. Carbon dioxide is a greenhouse gas that contributes to global warming.

Although the idea of voluntarily spending money to help preserve the environment may seem beyond reproach, a recent study has called on consumers to be more discerning about their choices.

The report (click here for PDF), which rated the effectiveness of these services and called for industry standards around carbon offsets, was published earlier this month by the nonprofit organization Clean Air-Cool Planet.

"It is a business opportunity. And just like any other, there will be good businesses and not-so-good businesses," said Bill Burtis, the communications manager at Clean Air-Cool Planet, which advises businesses and communities on how to reduce greenhouse gas emissions. "Some folks will step up and offer high-quality products, and there will be some people who can't."

The group called on consumers to push providers--there are roughly 40 organizations that offer these services--to be more "transparent" and offer more detailed information on the carbon offset mechanisms they use.

The study, which was prepared by Trexler Climate + Energy Services, ruffled some feathers among environmentalists and carbon offset marketers. These critics took issue with the report's objectivity and its method of gathering data and accounting for offsets.

If nothing else, the study appears to have prompted many insiders to scrutinize this nascent marketplace.

"There are no standards for offsets and more than a little disagreement on what constitutes a 'quality' offset. As the stakes grow, with more companies entering the offsets arena, it's time to ask some basic questions," wrote Joel Makower, a consultant on corporate environmental practices and clean technology.

Putting a price tag on carbon
Investment in technologies to help businesses, such as power utilities, reduce energy consumption and waste is booming.

Big-name venture capitalists, such as Kleiner Perkins Caufield & Byers, which made billions in IT and biotech, have turned their attention to clean tech, a field that covers things such as energy efficiency, renewable energy and biofuels.

That entrepreneurial flair has spilled over into the consumer arena as well.

One carbon offset company, TerraPass, was formed in 2004 out of a class at Wharton School of the University of Pennsylvania and later was funded with $250,000.

TerraPass offers "products" to neutralize the negative environmental impact a person creates from driving cars, from air travel and from energy consumption at home. Prices for the driving credit range from $30 to $80 per year. The most popular service is a $50 purchase, which offsets the greenhouse gases most drivers generate, according to TerraPass' Chief Environmental Officer Tom Arnold.

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