The knee-jerk criticism of “checkbook environmentalism,” as many pundits are calling the voluntary market, is that offsets do not force people to change their behavior. In February, former Vice President Al Gore caught flak when the Associated Press revealed that the star of “An Inconvenient Truth” uses ten times more electricity than the local average to power his home in Nashville. Yet, thanks to offsets, Gore claims to be “carbon neutral,” a catchphrase that was Oxford University Press’s 2006 Word of the Year. But the real problem, business reporters are finding, lies not with those who buy carbon offsets, but with those who sell them.


In the last few years, dozens of new operations have responded to the guilty cries from individuals, households, and small businesses. Some of the offsets they sell are as easy to purchase as soap. “Attention Shoppers: Carbon Offsets in Aisle 6,” read a headline in a March special section of the New York Times titled “The Business of Green.” Whole Foods, Dell, Travelocity, Hertz, Ikea, and many others now offer customers the opportunity to spend a few extra dollars to reduce the environmental impact of their shopping. The money is generally funneled to offset providers who plant trees, build wind turbines, trap industrial emissions, or engage in any number of activities designed to cancel out the deleterious effects of greenhouse gases. Outside of normal shopping hours, offsets can be purchased directly from a slew of new online providers that can, ostensibly, nix a ton of carbon for $5 to $25. There are even brokers for those who want to buy a lot of offsets at once.


But a number of articles have identified a high incidence of low-quality offsets on the market, which result from a variety of practices that range from negligent to duplicitous.


In 2004, the rock band Coldplay paid Future Forests, an offset provider since renamed CarbonNeutral, to plant 10,000 mango trees in India to reduce the carbon footprint from producing the band’s most recent album. In April 2006, The Sunday Telegraph discovered that most of the saplings that were planted had “withered in the arid soil” because there was not enough money for continued upkeep. That was one of the first goofs in the system; it gets worse.


In January, a nonprofit called Clean Air-Cool Earth released “A Consumer’s Guide to Carbon Offsets,” that categorizes the most reliable offset providers and provides a list of considerations for would-be buyers. Do offsets result from specific projects? Does the offset reduce emissions beyond what “business as usual” would accomplish (a concept known as additionality)? Would the project have happened without the offset money? Is the offset certified by a third party standard? Is the offset being sold to multiple buyers? These questions are important, but often go unasked by those looking to reduce their environmental footprint.


In March, BusinessWeek took a look at the “feel-good hype” behind offsets. The magazine scrutinized the portfolio of TerraPass, the company that, ostensibly, made this year’s Academy Awards presenters carbon neutral. But solid investigative reporting revealed that TerraPass has given a lot of its money to a methane-trapping project at a landfill in Arkansas that was in the works before the offset money came along. When approached by BusinessWeek, five of the six companies that sell offsets to TerraPass readily admitted that the well-intentioned funding was “just icing on the cake” for projects that would have happened anyway. The magazine also uncovered a dairy farmer in Washington who had received offset money to generate electricity from the methane in his cows’ manure. But by the time the funding reached him, and every middleman had taken a cut, the farmer collected only $2 for every $9 offset.


A week after these revelations, GreenBiz.com published a lengthy and probing criticism of both the compliance and voluntary emissions markets. Theoretically, wrote John Russell, the two markets should complement each other because the voluntary market funnels cash into smaller businesses that are overlooked by the CDM and ETS. But neither system works. The compliance scheme is “flooding the market with cheap carbon credits,” Russell wrote, and “a lack of standardized methodologies afflicts all aspects of the offset market.” To make matters worse, in the unregulated jungle of emissions trading, there are a host of scammers taking advantage of poor oversight.


The February issue of Forbes declared, “When hucksters talk green, they mean your wallet.” Author Daniel Fisher criticizes the swelling ranks of purportedly eco-friendly penny stock operators that are “capitalizing on the popular mania for sustainable energy.” Most of these companies, despite high market caps, show no sales, little equity, and even less environmental resolve. Many of the projects boast revolutionary, emissions-reducing technologies that border on the fantastical. Even Earth Biofuels, the company whose poster boy is the lovable country-singer-turned-environmental-advocate Willie Nelson, belongs to a holding company that has tangled with the Securities and Exchange Commission.