Analysis - July 30, 2007



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July 2007


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Understanding the dynamics of carbon credit purchasing from offsets when traveling carbon neutral

Voluntary carbon compensation, or carbon offsetting is applicable to anything that contributes to greenhouse gas (GHG) emissions1. It means paying an extra for buying carbon credits in offset projects, so that the emissions caused are balanced out. To be carbon neutral, the quantity of carbon credit purchased need to equal the quantity of emissions caused.

Being carbon neutral in tourism is mostly associated with the transport sector, but increasingly, hotels, events, and even car rental companies offer the possibility to neutralize their carbon footprint. Carbon neutrality is not yet mainstream, however, it is heading in that direction. For example, in 2005 0,5 % of British Airways passengers traveled carbon neutral and the figure is estimated to be 1 % presently. Some reports suggest the voluntary carbon market grew up to 1000 % between 2002 and 2005. However, as it is not regulated, a number of issues have emerged that require awareness.

Carbon compensation in context

The voluntary purchase of carbon credits is outside the Kyoto mechanism, and it represents an important part of climate change mitigation for individuals, as well as businesses. It is also an example of a voluntary application of the
polluter-payer principle. The Kyoto Protocol is a mandatory framework to signatory countriesand includes three principal mechanisms:

  1. Emission trading in pollution quotas
  2. Clean Development Mechanism projects (CDM)
  3. Joint implementation projects (JI)

Emission trading is an allowance-based measure that sets a limit on the amount of pollution permitted by Kyoto countries. Those emitting more than permitted must buy credits from those that pollute below limits on the carbon market, for example via the European Union Emission Trading Scheme. At present this affects mainly power companies and the manufacturing sector, and excludes tourism and the airline industry, although the latter is under significant pressure for inclusion.

Project-based measures include specific projects that will result in GHG reduction. Offset projects create new carbon credits and include renewable energy production, energy efficiency technology development and carbon sequestration. Kyoto-based projects are administered by signatory national governments and two types exist. “Clean Development Mechanism” (CDM) projects permit industrialized nations to invest in projects located in developing countries, to contribute to their sustainable development, while “Joint Implementation” (JI) includes projects between industrialized countries. When travelers purchase carbon credits to compensate or neutralize their activities, in general, they are not contributing to such projects. Exceptions include organizations such as “Atmosfair”.

Voluntary carbon credit purchasing does not equate to emission reduction in absolute terms, because the pollution still occurs. Thus, an effort is still required by everyone to reduce emission contributions. Researchers suggests that to achieve a 10 % reduction of GHG emissions from aviation, the purchase of voluntary carbon credits would need to increase by a factor of 400.

10 things to be aware of before choosing to be carbon neutral

1. Type of organizations selling carbon credits
Estimates indicate that more than 40 organizations sell carbon offsets and their growth and expansion has lead to certain transparency issues. Some are profit and others are non-profit organizations and they are all located in industrialized countries. They all verse a % of the money to offset projects that can be anything between 25 % and 90 %. Hence, some keep significant proportions for operating costs.

2. Variations in emission calculations
Recent research suggests significant differences (as much as a factor of 3) exist between the carbon calculators of individual offset organizations, thus, there is a need for standardization to improve credibility. Calculators need to be informative and accurate. The more parameters used, generally the more accurate the carbon calculation should be. In the case of emissions from flying, a good calculator will include the exact distance flown based on actual routes, take account of radiative forcing at different altitudes depending on the length of flight, occupancy rate, and the type of plane.

3. Cost of carbon credits
The price per ton of carbon offset is variable between organizations because the voluntary carbon market is outside the Kyoto mechanism and hence, it is not regulated, nor standardized. Buying carbon credits currently varies from $ CAD 3 to $ 43 per ton.

4. Type and quality of projects supported
Of the three main types of offset projects the most favorable include emission-free energy generation (wind, biomass, solar, geothermal) and new technology developments (any new products that use less energy such as hybrid vehicles).

When buying into these projects, the main issue relates to additionality; a debated concept in carbon accounting. What is important to know before purchasing carbon credits is whether the projects supported will genuinely result in GHG emission reductions. The question to ask is, if I did not finance this project, would it have occurred? If yes, then it is not a real reduction project, because its financing was not from carbon credit purchasing.

5. Beware of tree plantations
Intending carbon neutral travelers need to be well-informed about carbon credits that finance tree plantations. Evidence suggests problems and controversies surround such projects, and consequently some organizations do not even offer any carbon credits in them. The singular action of tree planting will not solve climate change problems for many reasons, notably because it does not lead to a reduction of fossil fuel reliance (Refer to next edition of the Globe-Veilleur on this subject).

6. Buying high-quality carbon credits
Voluntary offset companies can either operate in or outside (mostly) of the Kyoto framework. The advantage of buying credits from organizations associated with Kyoto, is that emission reductions are verified under a regulatory framework administered by national governments.

7. Project standard credit labels
Presently there are no standards to judge the performance of voluntary offset projects, although several are currently being developed. The Gold Standard Foundation offers a quality label to both Kyoto-based and to several voluntary based projects. Thus, it is currently the most reliable label. Such projects are rigorous, and tested for environmental quality by registered third parties. Gold standard projects exclusively focus on renewable energy and energy efficiency projects.

8. Buying future carbon credits: forward purchasing
Travelers also need to be aware that some organizations sell carbon credits in either already existing projects or in future projects. The purchase of future credits creates some risk, because the proposed project may not be realized and or under-perform. However, investing in projects upfront is important in generating funds to start new offset projects.

9. Location of offset projects
Some of the offset projects are located in developing countries and some have created a variety of environmental and social problems, such as people getting displaced from their land and losing access to resources on which their livelihood depends. Thus, it is important to check that the projects are verified and meet standards, so they deliver long-term benefits to the areas where they are developed.

10. Most credible offset organization?

Two recent studies evaluated offset organizations and the most recommended include “Atmosfair”, “Climate friendly”, “Myclimate” and “NativeEnergy”.

What next?

The above issues need to be addressed to ensure that additional expenditures by travelers and the tourism industry towards negating fossil fuel use are created with the desirable outcome for which they are intended.

Climate change is a global problem that needs global solutions. Thus, if the tourism industry is to keep its confidence in carbon compensation schemes, it needs a standardized method for carbon calculating and the projects it invests in need to be certified and accredited by a relevant global organization.

In the meantime, it is important to reduce GHG emissions and move away from the use of fossil fuels that contribute to climate change. If going carbon neutral, we need to ensure that carbon credits are purchased in quality projects, preferably clean energy and energy efficiency.

1: Carbon refers to carbon dioxide as a gas. Carbon offset projects sometimes involve compensating for other greenhouse gases. The Kyoto Protocol recognizes six gases as contributors to global warming, including carbon dioxide, methane, nitrous oxide, hydro fluorocarbons, per fluorocarbons, and sulfur hexafluoride.

– Anonymous. The Economist (2007) Carbon offsets: ripping off would-be greens? The Economist, 382(8520) p.61.
– Anonymous. The New Internationalist (2006) Special report on carbon related issues. The New Internationalist. July. Issue no.391.
Atmosfair website. Last visited 4 July, 2007.
Climate Friendly website. Last visited 4 July, 2007.
– Heughebaert, A. (2006) Étude comparative des programmes de compensation volontaire des emissions de C02 par les passagers d’avions. Institut de Gestion de l’environnement et de l’aménagement du territoire. Université Libre de Bruxelles. 98 pp.
– International Civil Aviation Organization 2007. Presentations and statements from the ICAO Colloquium on Aviation Emissions with Exhibition, held in Montreal Canada 14 – 16 May 2007.
Gold Standard Foundation website. Last visited June 11, 2007
– Gössling, S., Broderick, J., Upham, P., Ceron, J., Dubois, G., Peeters, P. and Strasdas, W. (2007) Voluntary Carbon Offsetting Schemes for Aviation: Efficiency, Credibility and Sustainable Tourism. Journal of Sustainable Tourism, 15(3) p.223-248.
– Kollmuss, A. and Bowell, B. (2007) Voluntary Offsets for Air-Travel Carbon Emissions. Evaluations and Recommendations of Voluntary Offset Companies. Tufts Climate Initiative. 53 pp.
-Luzadder, K. (2007) Agent Issues: Carbon-offset programs: a reality check. June 14, 2007. 5 pp.
Myclimate website. Last visited 4 July, 2007
NativeEnergy website. Last visited 4 July, 2007
-Tufts Climate Initiative (2006) A Consumer Handout. Flying Green. How to protect the Climate and Travel Responsibility. Tufts Climate Initiative. 5 pp.
United Nations Framework on Climate Change website. Last visited 28 June 2007.

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