Carbon Offsets: Government Warns of Fraud Risk The Federal Trade Commission is opening an investigation into the booming but unregulated "carbon offset" market. People buy these offsets to counterbalance their carbon emissions.
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Carbon Offsets: Government Warns of Fraud Risk

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Carbon Offsets: Government Warns of Fraud Risk

Carbon Offsets: Government Warns of Fraud Risk

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There is a new form of guilt going around. Call it carbon guilt. It's found among people who feel their lifestyle - driving, flying or maybe just leaf-blowing - adds too much carbon dioxide to the air. The guilty can buy something called a carbon offset. Essentially, you pay someone else to reduce or offset carbon emissions equal to your own. It is a booming business. And now, the federal government is worried that consumers are getting ripped off.

NPR's Christopher Joyce reports on a new investigation into the carbon offset market.

CHRISTOPHER JOYCE: It works like this. You go to a broker and pay to offset, say, 20 tons of carbon dioxide. That's about the average each American adds to the air annually. The going price these days for a ton of CO2 is about five bucks. The broker promises that your money will pay for a project somewhere that will reduce carbon emissions by 20 tons, say, by growing trees that soak up CO2 or building a solar energy plant.

Pankaj Bhatia of the World Resources Institute, an environmental think tank, says business is hot.

Mr. PANKAJ BHATIA (Manager, GHG Protocol Initiative, World Resources Institute): Amazing, in a word.

JOYCE: Last year, experts reckon the trade in the U.S was about $100 million and growing fast. Bhatia assess carbon footprints — how much carbon you or your business emits. He says he's been very busy.

Mr. BHATIA: Today, I got a phone call from a group that is managing concerts. And they wanted to know how they can quantify emissions from the transportation by helicopters of their equipment.

JOYCE: That's because the concert promoters wanted to buy offsets to neutralize the CO2 their concert produced. But how do the promoters know what they're paying for? After all, this is a market that trades in, well, gas, or more accurately, units of gas that are not produced. In the U.S., this trading is voluntary and no one is in charge. That worries consumer advocates.

Mr. JIM KOHM (Director, Enforcement Division, Federal Trade Commission): Our concern is that because these claims are very hard to substantiate, and consumers can't easily tell whether they're getting what they pay for, that there is the real possibility of fraud in this market.

JOYCE: That's Jim Kohm. He is in the enforcement division of the Federal Trade Commission. Kohm says he doesn't know yet if there is much fraudulent carbon trading, but he is suspicious.

Mr. KOHM: There's been an explosion in green marketing. There are claims that we didn't see in the marketplace 10 years ago. Carbon offsets are one of those new claims.

JOYCE: So the FTC had decided to investigate. One of the things they'll look into is double-selling.

Mr. KOHM: So for example, if I have solar panels on the top of my store, and then I sell somebody else the right to claim that carbon scrubbing, I can't then claim the carbon scrubbing for myself as well. And if somebody were selling that twice, three times, then that would be a deceptive practice that the FTC would need to take action.

JOYCE: Another hang-up is whether the carbon savings they're buying would have happened anyway. For example, what if a company cuts back on the electricity it uses simply to save money? Can that company then claim it's created an offset and sell it? Climate experts say no. The offset market, they say, is meant to pay for carbon reductions that would not have happened otherwise. Some environmental groups say that instead of buying carbon offsets, Americans should just do the hard work themselves - use less electricity, switch from coal to wind power, drive less.

But Erik Carlson of Carbonfund, a company that trades in offsets, says it doesn't really matter who cuts carbon, who pays for those cuts, or who profits.

Mr. ERIK CARLSON (Executive Director, Carbonfund): We need a 70 or so percent reduction in emissions. And in fact, that's all the planet actually cares about. It doesn't care about electricity versus methane versus this versus coal versus whatever.

JOYCE: But the FTC does care about consumers and whether they're getting what they pay for. The commission will hold its first public hearing on offset trading on January 8 in Washington, D.C.

Christopher Joyce, NPR News.

BLOCK: If you want to check up on your own carbon offsets, you can find some suggestions at

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