Environmental sustainability entails a three-fold approach. The first thing is to reduce consumption. The second is to find renewable, environmentally-friendly alternatives to finite and polluting resources. Once these two measures have been taken there may be emissions remaining so the third part of the approach is the mitigation of emissions.
« back to the Econation Articles page

Setting off to sustainability

This is the fourth in a four-part series of articles about Sustainability.

Environmental sustainability entails a three-fold approach. The first thing is to reduce consumption. The second is to find renewable, environmentally-friendly alternatives to finite and polluting resources. Once these two measures have been taken there may be emissions remaining so the third part of the approach is the mitigation of emissions. This mitigation is usually called offsetting and has the effect of neutralising all remaining climate and environmental impacts.

  • Offsetting can be achieved in a number of ways. Examples of types of offset projects are:
  • Carbon capture (sinks) and storage (reservoirs) – e.g. tree planting
  • Avoided deforestation – e.g. providing efficient log burners in underdeveloped countries
  • Renewable energy – e.g. wind and hydro-generation, biofuels etc
  • Energy efficiency and conservation – e.g. buying an efficient heating system for a local school
  • Methane collection and combustion

Offsets may be a cheaper or more convenient alternative to reducing one’s emissions. However, some critics object to carbon offsets believing that people will take the easy route and simply pay for existing emissions without first taking the steps of conserving, efficiency and using clean alternatives. Critics have also questioned the benefits of certain types of offsets, such as tree planting.

Carbon trading

Offset projects cost money so individuals and organisations must purchase ‘offset credits’, often known as ‘carbon credits’, to the amount of CO2 that they emit. This means that CO2 has a value and in effect is a commodity that can be traded.

The Kyoto Protocol has sanctioned offset projects as a way for governments and private companies to earn carbon credits which can then be traded in a marketplace. The protocol established a Clean Development Mechanism (CDM) which validates and measures projects to ensure they produce authentic benefits and are genuinely “additional” activities that would not be otherwise undertaken. Organisations that have difficulties in meeting their emissions quota are able to offset by buying CDM-approved Certified Emissions Reductions.

The CDM encourages projects that involve, for example, sustainable power generation, changes in land use, and forestry, although not all trading countries allow their companies to buy all types of credit. The commercial system has contributed to the increasing popularity of voluntary offsets among private individuals and also companies. However, in contrast to emissions trading, which is regulated by a strict formal and legal framework, voluntary carbon offsets generally refer to voluntary acts by individuals or companies that are arranged by commercial or not-for-profit carbon-offset providers. Nonetheless some formal standards for voluntary carbon offsets are emerging. Purchase and withdrawal of emissions trading credits creates a connection between the voluntary and regulated carbon markets.

Regulated offsetting

Emissions trading is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

The most common approach is called a ‘cap and trade’ scheme. In such a plan, a central authority (usually a government agency) sets a limit (or cap) on the amount of a pollutant that can be emitted throughout the country. Companies or other groups that emit are required to hold an equivalent number of credits or allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.

A NZ Emission Trading Scheme

In August 2007 the New Zealand Government announced the introduction of an Emission Trading Scheme (NZETS) which will be phased in between 2008 and 2013. The intention of the scheme was outlined as follows:

“That a New Zealand Emission Trading Scheme (ETS) support and encourage global efforts to reduce greenhouse gas emissions by:

  • reducing New Zealand’s net emissions below business-as-usual levels; and
  • complying with our international obligations, including our Kyoto Protocol obligations;
  • while maintaining economic flexibility, equity, and environmental integrity at least cost in the long term.”

Detractors of the scheme, often those who emit the most greenhouse gases, believe that the increased cost of production that they will incur from offsetting will make their products uncompetitive in the marketplace. Advocates answer that this is the whole point of the scheme. Unsustainable production will become less and less competitive which will ultimately lead businesses to change. The scheme provides an economic incentive for innovation and efficiency which have always been strategies for successful business anyway.

Voluntary offsetting

An emission trading scheme will limit but not eliminate greenhouse gas emissions. The production of everything we consume uses energy and therefore can produce greenhouse gas emissions. In all cases individuals and families should be looking to buy goods and services that are carbon neutral. If this is not possible e.g. car and airline travel, individuals can purchase voluntary carbon credits to offset their consumption.