The Best Policy

Got SUV Guilt?

Peace of mind can be yours for $274.

If you’re feeling guilty about driving your giant sport utility vehicle (but not so guilty that you’d ever give it up), salvation is at hand. For a yearly fee of around $80, a company called TerraPass will offset the damage your SUV does to the atmosphere by spending your money to reduce industrial carbon emissions and to promote the spread of clean energy. They’ll also send you a decal and a bumper sticker, so everyone in the neighborhood will know that your gas guzzler has been sanctified.

TerraPass, a for-profit group cooked up by a Wharton professor and his students, is one of many ventures that sell you the chance to offset your fossil-fueled existence, either by underwriting non-fossil power or by paying for pollution reductions. NewWind Energy, for instance, uses your guilt money to make wind power available to power companies at prices that are competitive with fossil fuel-based energy sources.

Another way to reduce carbon consumption is through emissions credits. The nonprofit Carbonfund is one group that buys credits, which represent the right to emit a given quantity of greenhouse gases, on a market called the Chicago Climate Exchange. The companies listed on CCX, all of whom have voluntarily agreed to emissions reductions, buy and sell pollution rights to one another as a cost-effective means of meeting their targets. Carbonfund buys credits from companies with low emissions and then “retires” them. Instead of a company buying credits so they can continue to pollute, Carbonfund tears them up and that much less fuel gets burned.

There’s no consistent retail price for carbon reduction. NewWind Energy charges about $37 to cancel out a ton of CO2 emissions. By comparison, TerraPass is a steal at about $11 per ton—and you get that nifty decal. But Carbonfund charges just $5.50 per ton, and because it’s a 501(c)3 nonprofit, your donation is tax-deductible. According to the handy calculator on the Carbonfund Web site, my family of four’s propane consumption, air travel, and time behind the wheel produces a good 50 tons of carbon dioxide per year. To offset my family’s CO2 usage, all I have to do is pay Carbonfund $274.

Like many hardheaded environmentalists, I’m impatient with a profligate society that raises recycling to the level of a sacrament while pumping greenhouse gases into the atmosphere. When I learned I could negate my family’s annual CO2 output for just $274, I was ready to write a check. I was also wary—the whole thing sounds like a cross between the indulgences sold by the medieval Catholic church and the commutation fees that some wealthy Northerners paid to escape service in the Civil War. So, do these programs help the environment at all or are they just designed to make polluting yuppies feel better about themselves?

Letting the little guy buy into carbon reduction represents nothing more than the democratization of an arrangement that utilities already use to reduce sulfur dioxide emissions (which are responsible for acid rain). But unlike with sulfur dioxide, there is no government-imposed cap on carbon dioxide emissions. That means that retiring carbon emissions credits is not the slam-dunk we might like it to be.

The companies listed on the Chicago Climate Exchange have all volunteered to be there. When TerraPass and its competitors buy and retire CCX credits, the overall amount of CO2 produced in this country is certainly lowered. But given their willingness to join the exchange in the first place, these companies might have reduced their emissions anyway.

Environmental markets have other pitfalls. An article in September’s Scientific American points out that one big problem is verification—it’s possible for someone to cheat by selling emissions credits without actually reducing their emissions. Even with the best of intentions, the desired reductions may not occur. The Dutch government has found this very problem when shopping in the Third World for cut-rate emissions reductions. The Wall Street Journal recently reported that, not surprisingly, getting a Brazilian dump to achieve the promised cutbacks in CO2 usage isn’t a sure thing.

TerraPass and its competitors claim to be rigorous about verification. The best way to make sure that your money is doing its job, though, is to cut out the middleman. If you buy a Toyota Prius hybrid and install compact fluorescent light bulbs, you can directly and unequivocally reduce your emissions without paying someone else you hope will do it for you. Perhaps the best argument against TerraPass and its competitors, then, is that they lull their customers into inertia rather than encouraging them to take action themselves.

The reality, though, is that most people will simply do nothing. By making it easy for the righteous lazy (a category that includes most of us, I’m afraid) to do at least something, TerraPass and its ilk are doing a good deed. I can’t see why buying some emissions reductions or wind power at affordable prices isn’t at least infinitesimally helpful, in the same way installing compact fluorescents in a single home is infinitesimally helpful. Buying a TerraPass is a little like voting—irrational for any individual, given that elections are almost never decided by one vote, but collectively beneficial indeed.