June 1 (Bloomberg) -- Chevrolet is offering an incentive for the environmentally minded this year, promising to make up for the greenhouse gases from the cars it sells in 2011 by paying others to reduce carbon dioxide in the atmosphere.
“What if a car company said it would reduce the carbon impact of the vehicles it will sell next year by up to 8 million metric tons?” asked the narrator in an ad that ran in November, as a guitar strummed and someone whistled a folksy tune in the background. “Would you say that’s a really big deal?”
Based on the first transaction in Chevrolet’s $40 million plan, the actual carbon reductions will be far less than promised. The Detroit-based automaker says it will count toward its goal the carbon reductions from a state program in Maine to insulate 5,500 homes. Chevy is buying carbon credits from the program for almost $750,000. That is enough to weatherize 170 houses, according to the Maine State Housing Authority.
“It is very fishy to claim credit for reductions from over 5,000 homes if 170 homes will be weatherized because of your carbon payments,” says Anja Kollmuss, a Zurich-based scientist associated with the Stockholm Environment Institute and one of five co-authors of a handbook on carbon offset programs, trading and standards.
Chevy says the carbon reduction project was recommended by an environmental organization it hired for advice, and that all the carbon offsets it buys will be certified by an independent standard-setting group. In Maine, the funds from General Motors Co.’s biggest brand will eliminate as much as 1,224 tons of carbon by 2014, based on data compiled by Bloomberg. That amounts to less than 3 percent of the 45,738 tons of reductions the credits Chevrolet says it will claim over the same period.
The difference illustrates a central dispute in the strategy of controlling greenhouse gases through the trading of carbon credits. As hundreds of companies, governments and charitable organizations have done by purchasing carbon offsets, Chevrolet is essentially paying someone else to cut emissions. At issue is whether this voluntary system really lowers pollution as much as businesses say it does.
For years, companies have been claiming credit for reductions from projects that would have happened anyway. In addition, scores of large companies, including Intel Corp., Johnson & Johnson and Dell Inc., have laid claim to reducing carbon emissions by purchasing renewable energy credits, related to electricity from water, wind and solar power. The price of the credits is too small to spur investment in additional production, according to more than 20 green-power developers.
In the Maine program to insulate the homes of low-income people, the state agency is using a $42 million grant from the U.S. economic stimulus program as well as funds from other federal programs. Until last year, carbon credits from the project would have been ineligible for certification by most of the unofficial groups writing standards for offsets because taxpayers were funding the emission cuts.
In December, Verified Carbon Standard, a Washington nonprofit that is part of the patchwork of these groups, approved a new yardstick. It accepted the idea that regardless of funding source, weatherized homes that save significantly more energy than houses of similar size can be eligible for carbon credits, according to David Antonioli, the group’s chief executive officer.
No government authority reviews or approves such rules for pollution accounting. The new Verified Carbon standard enabled the Maine housing agency to sell certified credits for the emission cuts to Chevrolet and to use the automaker’s money to insulate more houses.
The only problem is that the bulk of the carbon savings are being made without the GM division’s contributions, even though Chevrolet can count all of them toward its clean-air goal, says Michael Wara, an assistant professor at Stanford Law School near Palo Alto, California, who is a scholar of environmental law. Carbon offsets are valuable only when they encourage emission cuts that wouldn’t have happened otherwise, he says.
“The key is that decisions are actually altered by the creation of this carbon credit,” Wara says. “If they’re not, then we’re basically buying hot air.”
Chevrolet began considering ways to improve its environmental image last year, in addition to promoting the electric-powered Volt auto and the 42-miles-a-gallon Cruze Eco. The company pledged Nov. 18 to do more by offsetting the pollution from the 1.9 million autos it figured it would sell between the date of the promise and the end of this year. That includes the $110,300 Corvette ZR1, rated by the Environmental Protection Agency at 14 miles a gallon in city driving.
The GM brand hired the Bonneville Environmental Foundation, a nonprofit based in Portland, Oregon, to purchase carbon credits on its behalf, according to a statement. Bonneville obtained the Maine State Housing Authority’s carbon credits under a “Verified Emission Reductions Purchase Agreement” dated March 2.
The contract specifies that the buyer gets credit for all of the emission reductions from the insulation program, according to a copy obtained by Bloomberg through a public-records request. The price for the credits is blacked out.
Chevy spokeswoman Sharon Basel put the total at almost $750,000. All of the reductions will count toward meeting the carbon-cutting pledge, Basel says. Dale McCormick, director of Maine Housing, says carbon credit revenue will be critical to continuing the program as federal stimulus funds dry up.
“We’re very pleased with this project,” says Bill Devine, cross brand marketing manager at Chevy and the leader of its carbon reduction project. “We want to make sure that the offsets are beyond reproach.”
In announcing its involvement, the GM division acknowledged that U.S. funds from an economic stimulus grant and other programs contribute to the home improvements. Chevrolet said its purchase of “associated carbon savings” was “providing additional money.”
Verified Carbon describes its mission as “quality assurance for the world’s carbon market.” Verified Carbon was founded in 2005 by the International Emissions Trading Association and a pair of environmental business organizations.
The carbon market needed a simpler approach to attract more participants, says Antonioli, the CEO. The new system means it’s irrelevant that taxpayers funded almost all of the Maine housing program and that most of the emission cuts probably would have happened without Chevrolet’s money, he says.
“That misses the point,” Antonioli says. Projects that save the most energy should be rewarded, providing an efficiency incentive for housing developers and agencies, he says. “The goal is to establish very clearly defined thresholds for generating offsets, which will allow emissions to be reduced at a greater scale.”
Wara, the Stanford professor, says he doesn’t buy it. The U.S. allocated $5 billion of stimulus funds to weatherize homes through 2012. If other housing agencies followed Maine and sold carbon credits for the resulting emissions reductions, the market would be flooded with meaningless offsets, he says.
“It looks like a deceptive marketing claim,” says Wara. “If a project can’t show that it is changing behavior, it’s not clear what you’re buying other than a piece of paper.”
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