The Green Options Interview: Eric Carlson of Carbonfund.org
Carbonfund.org is a nonprofit organization that educates the public about the impacts of global warming. They also promote solutions by selling low-cost carbon offsets that individuals, businesses, and organizations can purchase to reduce their carbon footprint.
When a customer buys a carbon offset, Carbonfund.org purchases and then retires the carbon, taking it out of circulation.
Eric Carlson is the Executive Director of Carbonfund.org, and co-founded the company with his wife, Lesley. Eric has more than 15 years of experience in energy efficiency and global warming policy and project work. He was worked for the U.S. Environmental Protection Agency’s Energy Star program and has advised companies like Gillette, AT&T, and IBM on energy and money saving opportunities. Carbonfund.org’s motto is: “Reduce what you can, offset what you can not.”
I spoke with Eric by phone on March 23rd.
Green Options: There are a lot of companies and organizations out there selling carbon offsets, or Renewable Energy Credits (RECs). What makes Carbonfund.org different?
Eric Carlson: Our distinction is that we’re a nonprofit and that we let our customers decide for which projects their money is used. We also retire the carbon credits that we buy for our customers. Some companies buy them and then trade them, which doesn’t reduce the overall amount of carbon dioxide.
GO: What sorts of choices do your customers have?
EC: We offer three types of projects from which customers can buy RECs: renewable energy, energy efficiency, and reforestation.
GO: By the way, how do you “retire” carbon?
EC: We often just ask that our account with a particular project be closed, so that credits we’ve bought can never be used again.
GO: There’s a lot of discussion around the term “additionality” and carbon offset projects. Can you explain what that is?
EC: If a project would not have happened without someone buying the RECs to support it, then it is considered additional and a meaningful carbon reduction.
GO: How important is additionality to Carbonfund.org?
EC: We absolutely make sure that projects are additional. At the same time, I’m afraid that the controversies around additionality are slowing people down from just doing the right thing and reducing their carbon impact.
When you buy a REC, you are buying the environmental attributes of that electricity. There are so many variables that go into renewable energy projects, like leasing costs, interest rates, etc. RECs are a part of that, and by purchasing credits, you’re telling the market to buy and set up more renewable energy, and that’s additional.
Carbonfund.org cares a lot about additionality, we work on it every day, but we can’t let it get in the way of the prize.
GO: Some carbon offset companies don’t consider reforestation additional, or even a valid carbon offset.
EC: A tree is 100 percent additional. We buy that tree, so it would not have been planted without someone buying it. The Kyoto Procotol allows for reforestation as well, as does the Chicago Climate Exchange and tens of thousands of scientists around the world have endorsed reforestation as a meaningful way to cut CO2 pollution.
GO: Can you explain that a bit more?
EC: Think of renewable energy, energy efficiency, and reforestation all working together, playing distinct roles. Energy efficiency first brings down the demand for energy, then renewable energy ensures that the energy we need is clean and nonpolluting. Finally, reforestation sucks the carbon dioxide that’s already in the air back down and into its roots. It all has to work together.
GO: That’s the best argument for reforestation that I’ve heard yet.
EC: I just perfected that argument, actually.
GO: With so many renewable energy projects going up, how do you make sure yours are additional?
EC: Renewable energy is only 2 percent of our total energy – or, 98 percent of all new electricity generated since 1997 has been nonrenewable. So we can assume that 98 percent of the RECs out there are additional also, because if renewables could have happened without the RECs, we would have more than 2 percent renewables. So most renewable energy can be considered additional.
GO: How many customers does Carbonfund.org have?
EC: Over 22,000 people, plus over 160 companies and nonprofits.
GO: Have you ever been approached by a traditionally unlikely company wanting to buy carbon credits?
EC: Absolutely. We’ve worked with a large trucking company and even a private jet company, for example. These are not your typical “green” companies. They emit a lot of carbon dioxide and so this is a big financial commitment for them. These particular companies also don’t have big advertising budgets to talk about how green they are, so they weren’t just doing it for good PR.
GO: What are the questions people should be ask when looking to offset their carbon emissions?
EC: First, they should make sure that the projects are certified, verified or audited by a third party. At Carbonfund.org, we support Green-e and Environmental Resources Trust (ERT) certified renewable energy projects, our energy efficiency offsets are certified by the Chicago Climate Exchange and ERT. Our reforestation projects and methodologies are audited by ERT (in lieu of a certification standard) and our entire portfolio is audited by ERT to ensure we are offsetting what our supporters are asking us to. Our 2004 audit is up and our combined 2005/06 will be up in the next week.
After making sure the projects are certified, verified or audited, determine the cost per ton of CO2. The Chicago Climate Exchange’s website shows what companies, nonprofits, cities, and the State of New Mexico pay.
After pricing, decide on the project type from which you want to buy the offset, like renewable energy, efficiency, or reforestation.
GO: Speaking of pricing, there’s a lot of talk about why the price of carbon varies so much. Why do different companies charge so differently?
EC: Carbon doesn’t cost a lot and it doesn’t need to be painful. The cost varies according to the type of project. If you want to support solar energy in Seattle, then it’s going to cost you more than a wind farm in Kansas.
At Carbonfund.org, you know exactly what our markup is. Right now, carbon is being sold for $3.50 on the Chicago Climate Exchange. We sell the carbon credits for $5.50, while other companies charge up to $10 or $12 a ton. You’re getting the exact same product but are paying more for it.
GO: So why are some folks paying more for the same carbon credits?
EC: There’s a lack of education out there, and the media is often not clear about how this all works. But I think people are beginning to pay attention and understand it better.
In the end, the real cost of cutting CO2 is less than zero because it’s saving money. For example, you buy an efficient, compact fluorescent light bulb for $5 but you save $40 over its lifetime. So the bulb costs nothing. It is profitable to cut CO2 and we’re going to see more and more individuals and companies taking advantage of that.
March 28th, 2007 at 7:50 pm
i’m confused by some of the claims around pricing. dr. carlson says that cost for carbon varies according to project. then he says that the cost is $3.50, so we know exactly what his markup is. then he says that others charge more for the exact same product.
it doesn’t seem like all of these things can be true. dr. carlson, please clarify the following things:
you say we know exactly what your markup is, but i don’t after reading your responses. please tell us, exactly what is your markup?
also why did you skip your 2005 audit?
sorry if i sound suspicious, but carbon offsets seem ripe for abuse.
March 29th, 2007 at 1:57 am
Carbon credits are a terrible scam. The whole thing is in it’s infancy now but when it eventually becomes law the impact will economically penalize the middle class. The rich continue to fly around in their private jets and have multiple homes while the rest of us will have to save up to buy the carbon credits to fly once a year on a commercial airliner. Elderly will be suffering with cold homes in the winter and hot houses in the summer. All because of unproven hysteria.
March 29th, 2007 at 6:20 am
Carbon REC’s a scam? hmm, lets see what the conservative government estimate is on all this-
Top 25-Green Power Partnership:
“…their actions are helping drive the development of new renewable energy sources for electricity generation. Combined, these purchases amount to almost 4.4 billion kilowatt-hours (kWh) annually,”
http://www.epa.gov/greenpower/partners/top25.htm
My goodness, driving new development of renewable energy! but this can’t be, because he just sai… - maybe the only scam here is that uniformed yet somehow still opinionated commentors are allowed to make wild acusations with no tangible support and even less reasoning. Pray tell dear Mr Lee, will all those elderly folks you describe be forced to endure wild temperture swings because the electrons created by new zero emission power instead of polluting power like coal is somehow less energetic? Perhaps you would rather them suffer ashma/respirtory death from particulate matter or maybe be killed by increasingly stronger and whackier storms? Please- stay out of the deep end if you need your water wings of hysteria to float your arguments.
March 29th, 2007 at 2:45 pm
I’m interested in the original question as well. What are Carbonfund’s margins? I see on their web site that they fund a lot of tree-planting projects, which I’m pretty sure aren’t traded on the Chicago Exchange and which I’m also pretty sure are the cheapest type of offsets available. Eric’s statement about this seems misleading.
You say we know exactly what your margins are. So what exactly are your margins? What’s the number?
March 29th, 2007 at 5:02 pm
Folks - Eric was having some technical issues this morning, so I receieved his response via email. Here it is:
Piscator,
Some projects do indeed cost more, solar offsets can run over $100 a metric ton. We still support some solar but not a lot. I should have said the price fluctuates some but more and more information is showing a price of about $3.50 a ton is about right.
The Climate Trust recently acknowledged they'd spent $9.0 million on 3.0 million tons of offsets, or $3.00 a ton. A BusinessWeek article suggested a similar market price. The Chicago Climate Exchange (www.theccx.com) shows a current price on their market (which is the emissions size of Britain ) of $3.60 today. You get the idea.
While some people want the fight against climate change to hurt, we view a low cost of offsetting CO2 as a good thing. It engages more people to be involved and shows we can solve climate change without breaking the bank.
The ultimate goal is market transformation: for clean technology, such as wind or solar, to cost less than coal. At that point people will invest in CO2 free power simply based on economics. Another good thing.
Those who argue that offsets are about assuaging guilt miss the point of market transformation. With just 1/2 of 1% of our electricity coming from wind, and wind costing about 10% more than coal in the best places, we only need a couple million people to increase demand for wind to 1-2% to reduce the cost below coal. And that changes everything.
Regarding our audit, we were very small in 2005 and combined our 2005/06 audits. Both will be out in a week or so.
Thank you,
Eric Carlson
Carbonfund.org
March 29th, 2007 at 5:32 pm
none of this answered my question: what is *your* margin.
you told me about climate trust and business week. what is the price that *you* pay for *your* carbon. you said we know exactly what your margin is. what is it exactly?
March 29th, 2007 at 6:29 pm
Let me ask you a question Piscator- what gives you the right to know their margins?
Go and pick 100 private businesses, in any industry, and ask them their margins. Most are going to tell you, politely, that it's none of your business. Giving out information like that can be a huge disadvantage in a lot of business situations. They have a right to not disclose their margins, even businesses who sell carbon and wind credits.
The thing you want to know when evaluating Carbon Offset projects is how trustworth they are. Are they audited and does the company have a good repuation within the industry. The free market will work out pricing. If the Carbonfund (or any company selling offsets) is charging too much for their product one of their competitors will figure it out and charge less. It's basic Econ 101.
Carbon Offsets are complicated and there are certainly projects out there that are shady and scammy, but on the whole the concept is solid. They are a consumer driven subsidy that have proven to have quantifiable, audited positive impacts on the environment.
I understand people who have a hard time understanding all the details and concepts behind carbon credits and trading, but I don't think asking "what are your margins" is helpful to the discussion. It speaks to a fundimental lack of understanding for how both business and offsets work.
This is a good place to start in learning more about offsets- all the Green Options content that mention "Carbon Offset":
http://www.greenoptions.com/search/node/carbon+offsets
I know Google will also turn up a ton of results.
In full disclosure, I was a founder of Renewable Choice Energy (http://www.renewablechoice.com), which both sells Wind Credits and declines to share their margins when asked.
Shea Gunther
Publisher & Director of Marketing @ Green Options
shea@greenoptions.com
March 29th, 2007 at 7:12 pm
shea, i will tell you what gives me the right. quoting dr. carlson:
“you know exactly what our markup is. ”
these are his words. 100 private business in any industry didn’t make this claim. dr. carlson chose to make this claim. he was very precise about this. we know *exactly* what his margin is.
if its a huge disadvantage to reveal this information, why did he say this? if he wants to politely tell me its not my business, that’s fine. but if he publicly declares that we know exactly what his margins are, then he should be able to back this up.
i don’t have a hard time understanding the details about carbon credits. i also understand how numbers can be used in a misleading way, and everything about this interview suggests a lot of numbers being thrown around that don’t add up.
shea, can you explain to me why someone who says we know exactly what his margins are should be embarassed to state his margins? or is this a stupid question from someone who doesn’t understand business?
and is anyone going to answer my question?
March 29th, 2007 at 7:30 pm
You got me there, he did say "you know exactly what our markup is. "
Shea Gunther
Publisher & Director of Marketing @ Green Options
shea@greenoptions.com
March 30th, 2007 at 1:13 am
Again from Eric:
While prices vary, from project to project and day to day, certain averages are working themselves out, among the CCX, Climate Trust, BusinessWeek and others. Solar costs more, obviously, and wind in Kansas costs less than wind in California . We actually buy very few CCX tons but the market price they help set is important in setting the price for a wide variety of projects. But you get the idea. CCX has a market of 225 million tons and the Climate Trust has bought 3 million tons. When markets get to this size certain prices, like a stock market, starting working themselves out, even if they fluctuate day to day and over time.