Overhead and profit-taking in the carbon offsets system eats up about 70 percent of what is spent on carbon offsets, according to a report from UK-based Carbon Retirement report.
About 30 percent of the funds go into actual projects that reduce emissions, such as a wind farm in a developing nation, reports BBC.
The rest of the money goes into the following channels:
30 percent – Investment banks often buy up carbon offsets before a project is up and running, and they take an average 30 percent of the total in profits and operations.
15 percent – Shareholders of the companies putting the offset project together tend to take 15 percent in profits.
15 percent – Taxes, bank interest and fees.
10 percent – The margin normally taken by the retailer of carbon offsets, who sells them to corporations, individuals and other entities.
The Carbon Retirement report was derived from industry research and United Nations data. See the methodology here (PDF).
Carbon Retirement itself is not entirely unbiased. The group promotes purchases of allowances from the EU Emission Trading Scheme, instead of carbon offsets that might be used to set up renewable energy in developing nations.
Renewable energy credits (RECs), which are offsets that go toward adding renewable energy projects, continue to be a popular choice for corporations that want to offset their emissions.
For instance, Kohl’s said it plans to become carbon-neutral, and about 71 percent of that effort will come through purchase of RECs.