The inexact science of carbon neutrality

Still in its early stages, carbon neutrality is a challenging and questionable achievement

You've likely heard the term "carbon neutral." It's applied to individuals, organizations, and even products that produce a net sum of zero carbon emissions. They often achieve this tricky feat by purchasing carbon offsets or credits, which are financial instruments representing a reduction in greenhouse gas emissions. In other words, to make up for emitting X tons of CO2 into the atmosphere each year, a company might invest millions of dollars in planting forests or building clean energy sources, such as solar panels and wind farms.

Unfortunately, the carbon-neutral trend is still young, and achieving carbon neutrality is an inexact science, a point well highlighted in a recent Wall Street Journal article that focused much attention on Dell's proclamation that it had achieved carbon neutrality earlier this year.

[ What's the potential cost of emitting GHGs? Please read "CO2 spewer? See you in court!" ]

Notably, Dell isn't the only company out there aspiring to become carbon neutral. You can add organizations such as Yahoo, Google, Timberland, and News Corp. to that list. (Other companies, such as HP and IBM, aren't being quite as aggressive, instead working to reduce their carbon footprints.) I suspect that the WSJ could have focused on any of these companies and found inconsistencies. I'd wager that Dell's repeatedly stated aspiration to be the greenest technology company on the planet simply makes it a more tempting target.

One of the problems with investing in carbon offsets is that it can be tough to measure what you're really getting for your money -- if anything -- in so far as reducing your company's carbon footprint. For example, in the WSJ article, the writer reports that "some of those improvements would have occurred whether or not Dell invested in them, according to some of the companies involved. That suggests Dell isn't ridding the atmosphere of as much pollution as it claims."

The article deteriorates into almost a "he said, she said" account, where Dell states that the programs it's invested in wouldn't have been feasible without its funding. In some case, the funding recipients agree: For example, a representative of Conservation International says its project to protect a threatened forest in Madagascar wouldn't have occurred without Dell's investment. The company is offsetting about 100,000 tons of carbon dioxide annually through the project.

Some funding recipients, however, assert that their projects would go on without Dell's investment, such as a trio of wind projects in Iowa owned by Mid American Energy, as well as the Elk Wind River Project, in Beaumont, Kan. Representatives of both projects attributed their profitability to federal tax credits, and that the sales of RECs (renewable energy certificates) just brought added value.

Notably, this isn't the first time questions about the value and legitimacy of carbon-offset projects have come to light. For example, according to the Christian Science Monitor, "the United Nations has set up the CDM (Clean Development Mechanism) to help companies in industrialized countries invest in projects in poorer nations that cut greenhouse-gas emissions as part of their countries' commitment under the Kyoto Protocol or the European Union's emissions plan."

A worthy endeavor -- "but Stanford University researchers who've studied the CDM say the emissions cuts are largely illusory," according to the article. "As many as two-thirds of the programs funded contribute nothing new to reducing emissions."

Clearly, picking a carbon-offset project is, for the time being, no easy task. Turning to a third-party consultant to assess the viability of each project makes sense -- except even then, there are no guarantees. Case in point: Per the WSJ article, Dell hired a consultant who concluded that the wind-power projects Dell was considering wouldn't have been feasible without Dell's investment -- yet the companies involved in the projects said otherwise.

The question of whether carbon offsets hold value just scratches the surface of the overall carbon-neutrality question. For the time being, there isn't even a consistent approach to measuring an organization's carbon footprint in the first place. And if you don't know how much CO2 you're responsible for, how do you know how much offsetting is necessary to become neutral? It makes sense, I would say, to include the emissions produced by your company's boilers, electricity use, company cars, and business travel. But should you include the manufacturing process down the supply chain to make the parts that your company uses to build products? The fuel needed to ship products to stores where they're sold? How about factoring in the electricity consumers use to power your product?

[ For more, please read "Green demands trickle down the supply chain." ]

In short, companies such as Dell and Yahoo are carbon-neutrality pioneers, and their efforts will help decide how the market for carbon offsets shapes up. Personally, though, I'm more interested in seeing what companies can do internally to reduce the greenhouse gas emissions (while reducing energy waste and costs in the process). I know Dell, Yahoo, and other companies are doing just that -- but I could see other companies relying almost entirely on potentially worthless carbon offsets to "green up" their image.