Carbon Offsets

Robert Frank argues for carbon offsets as a complement to carbon taxes or cap-and-trade: Carbon Offsets: A Small Price to Pay for Efficiency, by Robert H. Frank, Commentary, NY Times: Are carbon offsets a good thing? They are intended to reduce the environmental impact of consumption. Traveling by plane, for example, causes carbon dioxide to be emitted into the atmosphere, so travelers can pay a specialist to offset those emissions some other way — perhaps by planting vegetation or installing renewable-energy technologies. It all sounds reasonable.Yet carbon offsets have drawn sharp criticism, even ridicule. … But the criticism is misguided. If our goal is to reduce carbon emissions as efficiently as possible, offsets make perfect economic sense.Consider the decision of whether to buy a hybrid car. … Many people drive so little that they wouldn’t save enough on gasoline to recoup the higher cost. Yet many such people buy hybrids anyway, because they think they are helping the environment. Well and good, but they could help even more by buying a standard car and using the savings to buy carbon offsets. …Of course, carbon offsets alone won’t eliminate global warming. People also need stronger incentives to take into account the environmental consequences of their actions.

President Obama has proposed attacking the problem with a carbon cap-and-trade system. … This approach was first used in the United States to address acid rain… Compared with more traditional regulatory measures, the auction method substantially reduced the cost of achieving the law’s air-quality target.

As people learn more about such an approach, they seem less likely to oppose it. … A carbon cap-and-trade system is functionally similar to a carbon tax. … Carbon offsets are no substitute for the stronger incentives inherent in carbon taxes or cap-and-trade, but they can reinforce their effects. Both carbon taxes and permit auctions would also generate revenue that could be used to buy additional carbon offsets. … Carbon offsets, though much maligned, are an excellent idea. If you want to help reduce carbon emissions, consider buying some.

2 Responses to "Carbon Offsets"

  1. Guest   May 31, 2009 at 7:39 pm

    and much higher electricity prices on the backs of all those on SSI will force them to stop buying electricity. How idealistic you are!

  2. Jim Summers   June 1, 2009 at 3:47 pm

    People might buy hybrids as insurance against future price rises. Cars last ten years or more, so you have to worry about the cost of gas over that whole period. When you buy a hybrid compared to a regular car, you essentially pay for a portion of the fuel bill up front (by paying more for hybrid technology) and therefore partly protect yourself from future gas prices.Suppose we come to our senses, impose a carbon tax, and the price of gas goes up. People who buy hybrids will only pay a fraction of that increase, and thus get a reward for their foresight. If they buy a normal car plus carbon offsets, they’ll pay twice for the extra carbon emissions; once when they buy the offset and a second time when they pay higher carbon taxes on the extra gas they burn.