Carbon offsets—credits that cancel out the purchaser's greenhouse gas emissions by supposedly triggering actions and projects that prevent such pollution elsewhere—have had a bumpy ride in the last few years. By late 2007 the idea of going "carbon neutral" using offsets had gained enough clout in the U.S. that the House of Representatives spent about $89,000 on offsets. A host of tech companies jumped aboard, too, with Dell, Google, and Yahoo, among others, all pledging to go carbon neutral. But since then, the largely unregulated carbon offset market has been dragged through the mud as upon closer inspection, it became clear that emissions weren't always being canceled out.
Now, with new climate policies and regulations coming down the pike—the EPA plans to spend $5 million next year developing a methodology for carbon offsets under the cap-and-trade system being negotiated in Congress—the ground on which carbon offsets stand is shifting significantly. Tech rivals Google and Yahoo have mapped out two different visions for how to navigate it.
For Yahoo, carbon offsets are out. The company announced last week that it will stop buying offsets for its operations, opting instead to focus on energy efficiency—decreasing the "average electricity consumption and greenhouse gas emissions" from the company's data centers, as Yahoo co-founder David Filo explains on the company blog. "We believe creating highly efficient data centers will have a greater long-term, direct impact on the environment and gives us the best opportunity to play a leadership role in addressing climate change."
Google, meanwhile, plans to stick with offsets as part of a larger portfolio of renewable energy and efficiency improvements—despite the fact that it took until this May for the company to finish buying the credits for the energy it used way back in 2007. As Celeste LeCompte explains on GigaOM Pro (subscription required), that's largely because tracing carbon offsets back to particular projects and verifying that they actually reduce emissions—and by how much —is tricky business. Google's green energy czar, Bill Weihl, noted on the company blog back in May that the lack of regulation for carbon offsets leaves a lot of grunt work for green-minded companies to figure out if their purchases really trigger emission reductions that wouldn't happen otherwise, or what's often called "additionality". "Current standards for offsets require a significant amount of work to evaluate the quality of each offset project and ensure that projects go beyond 'business as usual,'" he wrote. "Stronger additionality standards—that are more stringent, clear, and objective—would also make it simpler for corporations like Google to use offsets as part of an overall strategy to neutralize emissions."
Companies that follow the lead of Yahoo, with its plan to ditch offsets altogether (at least for the time being) and buckle down on internal efficiency improvements, or Google, with its efforts to police its own offset purchases no matter how long it takes while also working to slash energy use, may be able to avoid the pitfalls of another tech company that has been among the most aggressive in pursuing carbon neutrality: Dell. In addition to energy efficiency improvements, the company has been buying offsets based on renewable energy projects to reach that status. But late last year it was revealed, thanks to some in-depth reporting by The Wall Street Journal, that the company was "claiming carbon neutrality mostly by purchasing environmental credits." Furthermore, some of the offsets were for projects that would have gone through anyway—illustrating the need for those so-called additionality standards.
This is where regulators are poised to take a larger role, setting rules for what kinds of projects can be marketed as carbon offsets. Until now, startups have been stepping in to fill much of the knowledge gap, and going forward, they'll likely be able to find a role helping companies sort through the new regulations. Says Dan Kalafatas, COO and president of two-year-old offset broker 3Degrees, on the day of his company's launch: "Our customers are in the business of coffee or computers," not carbon.