Wednesday, October 11, 2017

Is there a business case for buying carbon offsets or RECs?

Courtesy Stuart Miles,
At a recent Sedona City Council meeting, one of the Councilors asked what the business case might be for Renewable Energy Credits (REC's). (Basically these are the renewable portion of the kWh's produced, the cost premium, which can be bought and sold.) I wanted to broaden the question to include carbon offsets/credits where you compute your greenhouse gases and via a third party, pay for a project that offsets that amount of carbon dioxide or equivalent gases. (Nature doesn't care who reduces greenhouse gases and it may be cheaper for someone else to do it than you.)

Here's my answer.


It is incumbent on every generation to pay its own debts as it goes.
A principle which if acted on would save one-half the wars of the world. 

—Thomas Jefferson

Every day that we as a society continue to be unsustainable, we are leaving debts for the future generations (environmental, social, and genetic), in some cases, for the current generations downwind or downstream.

While it is still legal to buy energy based on fossil fuels, it doesn’t make it right. Purchasing RECs or carbon offsets are a way to internalize costs imposed on others, what economists call ‘externalities,’ basically problems you caused that you don’t have to pay for: asthma medicines for kids living near coal-fired power plants, rebuilding costs for survivors of more frequent extreme weather events, managing disposal and storage of nuclear fuel for thousands of years, etc.

While this moral argument might not impress your Finance Director, there are ways to use these methods to improve your competitiveness.


A number of companies now have internal carbon fees. You could ‘charge’ each department the equivalent of a carbon offset, giving them incentives to be more energy efficient, and then allocate those funds for renewable projects or other carbon-reduction strategies. If you challenged each department to find the savings to pay for their internal carbon offset, this could uncover other cost-savings measures. (Resource:


Visitors could be offered the opportunity to buy a carbon offset for their trips. (This could be as an opt-in or an opt-out fee.) If 1/10th of our 3 million visitors paid, on average, $10 (perhaps tax-deductible), that would result in $3 million a year that could be spent on local projects (City, schools or workforce housing), creating local jobs.

Demetri Wagner, owner of El Rincon Restaurant, has already built a system and non-profit to do this, which could be adapted to this situation. He was so concerned about climate change, he created the World Survival Foundation and the GenIsis Project where individuals or organizations can calculate their carbon impact and pay for a carbon offset, directing it to the school of their choice. To make his offset program credible, I believe he needs to move away from market pricing to project pricing so that if you purchase a metric ton of GHG offsets, you actually offset that amount. My point is there is already a system in the Verde Valley that could be adapted to do this.


What if Sedona (or your community) became the first carbon-neutral destination, a guilt-free trip? Places like Costa Rica and Montenegro are among those working on it. Why not us? Given the ‘first mover advantage,’ we could get a lot of free publicity if we were first. In the last 20 years, early-adopter businesses like Interface Carpet have all said they couldn’t have paid for all the free publicity they got. Here’s a google search that reveals some of the tourist destinations intending to become climate neutral.

This paper provides a critical review of the concept of “carbon neutrality” for tourism destinations within the framework of the UNWTO's Davos Declaration, ...
"We have an opportunity to become the first carbon-neutral tourist destination," he said. "We want Costa Rica to be a guilt-free location to visit, and that will be ...
Aug 24, 2017 - While a lot of destinations claim to be doing their part to minimize their ... This means their Myanmar trip is fully carbon offset, to the tune of 577 ...
Jan 25, 2012 - Bequia is a delightful link in the chain of islands which make St. Vincent and the Grenadines such an attractive destination for sun worshipping ...
Oct 30, 2009 - Costa Rica threw down a green gauntlet this week, announcing its plan to become the world's first carbon-neutral destination. At a sustainable ...
Apr 7, 2017 - Montenegro is taking a number of steps to become a hot ecotourism destination. › Environment › Greenhouse gas emissions
Mar 26, 2009 - By setting out the steps to enable the Maldives to brand itself as a carbon-neutral destination, we could be accused of actually encouraging ...


If an organization decides that they should offset some or all of their carbon emissions, then you must ask what method is the best carbon-return-on-investment, what actions get you to carbon neutral at the cheapest cost.
  1. Energy efficiency is often the cheapest place to start, often with amazing internal rates of returns (30% is not unusual). This also reduces the amount of carbon-emitting energy you have to offset. Remember to think also about actions that can reduce transportation-related emissions as well.
  2. Green power programs are available from most, if not all, electric utilities. You can also sign up with Arcadia Power, which likely has a cleaner mix than your utility.
  3. Solar panels and co-generation systems can have a big first cost, but leasing programs and energy savings performance contracts can eliminate the initial cost investment and save you money on utilities right off the bat.
  4. REC's and carbon offsets can be used for whatever else you can't eliminate.

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