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March 1, 2009

Fair Trade Marketing Comes to Carbon Offsets

Once the domain of coffee and pineapples, the notion of fair trade certification is making its way to the voluntary carbon trading industry.

Dave Rochlin, former chief operating officer of fair trade certifier Transfair USA, has cofounded a company, ClimatePath, that will certify and bring more transparency to carbon projects. Carbon offset payments are made to a nonprofit that then forwards the proceeds to the recipients.

“If a company wants to be carbon-neutral or carbon-light, our site helps them develop a portfolio that consumers can understand,” Rochlin said. “Larger corporations have the influence to be active in selecting their carbon offsets. We’re trying to bring that same sort of capability to small- and medium-sized businesses. A company can come to us with their footprint calculation and then select a portfolio of carbon offsets that meet their needs.”

Clients would would have a micro-site within climatepath.org that showcases efforts to offset emissions.

A GAO report last August indicated the voluntary market for carbon offsets is growing, but that quality assurance is lacking.

The global carbon market, including clean development mechanisms and voluntary purchases, grew to $64 billion in 2007, more than doubling over 2006, according to the World Bank. Most of the trading occurred in the European Union, with just $72 million traded on the Chicago Climate Exchange.

The global market for voluntary transactions leaped from $146 million in 2006, on 33 million tons of CO2e, to $265 million in 2007, on 42 million tons of CO2e, according to the World Bank.

Rochlin said he has heard estimates of the U.S. voluntary carbon credit market growing to as much as 100 million metric tons. ClimatePath hopes to capture 5-10 percent of that market, he said.

Calculating the true cost of carbon offsetting is very complicated because of the many upstream and downstream inputs, said Rajat Deb, president of LCG Consulting, Los Altos, Calif.

Deb said he was skeptical of purchasing fair trade carbon credits. “If I’m producing dishwashing detergent, and I pay a premium for carbon offsets, and my competitor buys them at market price, he will have the better bottom line,” Deb said.

To Rochlin, it’s all about how a company markets what it is doing in the carbon-offset market.

“It’s not so much about certification but adding transparency,” Rochlin said. “With coffee, you get to see where and how the coffee was grown. With carbon offsetting, people will only pay for it if they have a real sense of where the money’s going. With transparency, you can choose where those carbon offsetting dollars go. And consumers who visit the site can see where that money’s going.”

“Everybody’s more concerned about climate change,” he said. “In my time at Transfair, I noticed that there are people who buy organics and are concerned with climate change, but the action is not always there. As consumers tell businesses that footprint offsetting and carbon monitoring are important, they will follow.”

“The lowest-quality carbon tends to be the cheapest,” he said. “From a voluntary perspective, the kind of consumers who will tend to be most engaged in buying products that offset carbon … these kinds of consumers are used to paying more.”

“There’s a massive gap between what is happening and what should be happening,” he added. “Retailers can drive change but they have to feel that consumers will come along with them.”

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