Chevy's Carbon Plan: Less Than Meets the Eye

Last year, Chevrolet announced an incentive for the environmentally minded. For anyone who buys a Chevy between Nov. 18 and the end of 2011, the company promises to purchase carbon offsets, which are payments meant to encourage environmentally friendly projects that reduce carbon emissions and mitigate the impact of the new autos' pollution.

Based on the first transaction in Chevrolet's $40 million plan, the actual carbon reductions will be far less than promised. The automaker is paying almost $750,000 to bolster a state program in Maine that insulates homes for low-income families. The investment is enough to weatherize 170 houses and reduce carbon emissions by 1,224 tons through 2014, according to the Maine State Housing Authority. Yet Chevrolet is receiving credits for 45,738 tons worth of reduced carbon—the total savings Maine expects through 2014 from weatherizing all 5,500 homes in the program.

The difference illustrates a peril in using carbon offsets to achieve environmental goals, according to 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. Experts agree that carbon offsets are valuable only when they encourage emissions reductions that wouldn't have happened otherwise. "The key is that decisions are actually altered by the creation of this carbon credit," says Michael Wara, an assistant professor at Stanford Law School and a scholar of environmental law. "If they're not, then we're basically buying hot air."

In the Maine housing project, a $41.9 million grant from the U.S. government's economic stimulus plan is paying for 80 percent of the 5,500 homes to be weatherized. Other taxpayer-funded programs, including an insulation project from the Energy Dept., will pay for most of the rest, the housing authority says.

Although the government is footing most the bill, a new protocol from Verified Carbon Standard Assn. allowed Maine to sell credits equivalent to the entire project's savings. Verified Carbon is a Washington nonprofit that sets standards for carbon offsets. It was founded in 2005 by three groups including the International Emissions Trading Assn., which counts large emitters such as Chevron (CVX) and Duke Energy (DUK) among its 150 members. While many verifiers examine a project's motivation and audit the sources of funding to ensure that offset investments result in new emissions reductions, the carbon credit market needed a simpler approach to attract more participants, according to David Antonioli, chief executive officer of Verified Carbon Standard.

The new system means it's irrelevant that the emissions cuts almost certainly would have happened without the money from Chevrolet, according to Antonioli. "That misses the point," he says. The aim is to reward those projects that save far more energy than others, providing an incentive for housing developers and agencies to be more efficient, he says. Chevy paid above-market prices for the offsets, but because the per-ton cost of carbon is so low, it was able to purchase all of the program's carbon savings with an investment that will fund just 3 percent of the project.

In announcing its involvement, the General Motors (GM) division acknowledged that U.S. funds from an economic stimulus grant and other programs would contribute to the home improvements. Chevrolet said in a press release that its purchase of "associated carbon savings" was "providing additional money." Dale McCormick, director of MaineHousing, 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 Chevrolet and the leader of its carbon reduction project. "We want to make sure that the offsets are beyond reproach."

The U.S. allocated $5 billion of stimulus funds to weatherize homes through 2012. Wara, the Stanford professor, says that if other housing agencies were to follow Maine and sell carbon credits for the resulting emissions reductions, the market would be flooded with meaningless offsets. "It looks like a deceptive marketing claim," says Wara.

The bottom line: Chevrolet will get credit for the carbon reduced by a Maine weatherization project even though the government financed most of it.

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