Climate

Startups are popping up to offer carbon offsets. It’s raising thorny questions.

Cloverly and Cooler are helping ecommerce companies neutralize the carbon impact of their business. They’re also letting companies choose whether they want to do it themselves or pass that responsibility on to their customers.

Forest

Who should pay to offset carbon emissions?

Photo: Marita Kavelashvili/Unsplash

You’ve just added a product to your online shopping cart. As you’re finishing checking out, you see an option to offset the carbon emissions from your purchase for a small price. Do you pay extra to offset the carbon impact of your purchase? And should you, as the consumer, be responsible for that cost?

Those questions are increasingly popping up at checkout as ecommerce companies aim for carbon neutrality. They’re hard to answer, because it’s tough to gauge both where responsibility lies and the problems with some kinds of offsets.

Public concern about the climate crisis is at record levels, and more startups are springing up to give people and businesses the option to offset carbon emissions. That’s not a stand-in for actually reducing carbon pollution by ending the use of fossil fuels. But it’s a stopgap that’s becoming more widespread at ecommerce sites. One of the startups offering the service is Cloverly, an Atlanta-based company with an API that allows companies to measure and offset their carbon emissions.

Cloverly’s API takes into account customer ecommerce data, including distance, package weight and mode of transportation, which it uses to calculate the amount of carbon emitted. These estimates are done in real time when the customer adds an item to their cart. The system then computes the cost of offsets or renewable energy credits it would take to cover the emissions from a customer’s order.

“The idea was to make sustainability accessible to the end consumer,” said Archana Veerabahu, its marketing director.

According to Veerabahu, Cloverly clients have seen increases in sales, higher “stickiness” and more customer retention after implementing the Cloverly widget on their site.

Who should be responsible for emissions?

Cloverly’s clients can either offset their emissions themselves or let their customers elect to pick up the tab. Tea brand Harney & Sons, one of the company’s clients, lets its customers decide. Marketing director Emeric Harney said about 25% of customers opt to offset their purchase.

Veerabahu sees merit to both sides when it comes to whether a company should shoulder the offset cost itself or pass it on to customers. She views the latter as a way to educate customers about their own carbon footprint and find ways to reduce their personal emissions elsewhere. (Evergreen reminder that 100 companies are responsible for more than 70% of carbon emissions since 1988.) Some customers, though, might simply not want to opt in.

“If it slows down the shopping sequence, it starts to be more problematic, and the results aren't as good,” said Michel Gelobter, the founder of Cooler, a startup aimed at helping businesses go carbon neutral.

That choice can be particularly difficult for shoppers when it comes to higher-cost purchases, like air travel. Last November, Ryanair Group CEO Michael O’Leary told a radio show that only 1% of his airline’s passengers voluntarily paid to offset the carbon emitted from their travels: “People want low-fare air travel, and people want somebody else to pay the environmental taxation.”

Ryanair competitor easyJet, on the other hand, offsets 100% of carbon emissions. The company’s Chief Commercial Officer Sophie Dekkers told Simple Flying last year that she believes the responsibility of offsetting lies with the airlines, not passengers.

But giving consumers the choice to buy carbon offsets “misses the point,” said Amir Jina, an assistant professor at the University of Chicago Harris School of Public Policy, because the small set of choices individuals can make are negligible in scale compared to the emissions from major polluters.

Small margins, big decisions

The cost of buying offsets can be prohibitive for low-margin industries like food and beverage, according to Gelobter. Offsets for a hamburger patty — an admittedly carbon-intensive food — could easily cost the same as its entire profit margin.

Covering the full cost of offsets wouldn’t be Harney & Sons’ full margin, “but it certainly would eat away at the small margin that there is,” Harney said. But it’s a relatively small cost for customers, one that Gelobter says typically rounds out to about 2% to 3% of a product’s purchase price. Offsetting the carbon impact of a $21 bag of loose-leaf tea from Harney & Sons, for example, would cost a mere $0.50.

Gelobter said getting consumers on board with paying a fee to offset the carbon emissions of their purchases would be a cultural shift and a potentially hard sell, but it’s not impossible. He compared it to tipping at coffee shops: Three or four years ago, it was not widespread for baristas to flip the terminal over for customers to add gratuity, but “people are adopting it.” And for some industries, that might be the only feasible option financially.

Some offsets raise red flags

The quality or effectiveness of carbon offset projects can vary widely, and there’s a growing awareness within the climate tech space that projects’ actual climate impact must be evaluated with a fine-toothed comb. Some offset projects can result in displacement of Indigenous people, while others, such as forest projects in California, can go up in smoke in the face of increasingly intense wildfires (ironically, being driven by the deepening climate crisis).

Gelobter and Veerabahu have a few recommendations for individuals on how to evaluate the quality of carbon offset projects. If the solution is nature-based, it’s worth looking into the project’s longevity and certification process. Gelobter recommends jurisdictional nature-based solutions, which are managed or tracked by a government entity and more likely to be held accountable.

For its part, Cloverly only backs carbon offset projects that are registered and tracked by certification programs like Gold Standard and the American Carbon Registry. These organizations typically evaluate offsets based on three main principles: additionality, leakage and permanence. Those three factors relate to whether a project actually sequesters carbon that would otherwise have stayed in the atmosphere, and if it does so on a long enough time scale to provide meaningful climate benefits. In addition, they take other elements into consideration like governance and whether the project developer can be trusted to monitor the site.

Despite the independent verification that these registries provide, though, it’s still fair to be skeptical about whether the offsets are actually doing what they claim.

“The entire system is morally and ethically conflicted,” said Danny Cullenward, the policy director of CarbonPlan, a nonprofit that evaluates climate action plans. He added that these certification programs have an outsized incentive to accredit even subpar offset projects because they get paid for every certification.

He pointed to a wind farm project in Texas that Cloverly buys into, which claims to have needed the offset income to get built in 2008 “despite the economics of wind being solid at that time” and Texas being the top wind-power producer in the U.S. In his view, the additionality element isn’t there, even though the project is credited by one of the largest carbon offset registries in the market. Cloverly CEO Jason Rubottom said the company no longer works with the wind farm, and that Cloverly had only purchased $25 of credits three years ago.

How the carbon is neutralized matters

Like Cloverly, Cooler helps ecommerce businesses neutralize the carbon emissions of their transactions and products. It does so, however, not with offsets, but through buying carbon market permits and retiring them permanently.

There are four major carbon markets in the world: the European Union, California, Quebec and a group of 11 Eastern U.S. states called the Regional Greenhouse Gas Initiative. In all of these markets, major emitters are required to buy permits to account for their carbon emissions. In the Northeast and mid-Atlantic regions, RGGI has helped cut emissions over the last decade by over 40%.

“It’s very effective,” Gelobter said. Moreover, the money collected goes toward investments in clean energy initiatives in the region, such as community solar and mass transit projects. The average price of a RGGI permit currently stands at about $13 per ton of carbon.

In Gelobter’s view, purchasing and then retiring these permits is a more effective way of tackling the climate crisis from a corporate lens than purchasing other types of carbon offsets. Retiring then stops emissions rather than, well, offsetting them. “We're actually going to a smokestack and turning down the valve a little bit with every purchase,” he said.

“Offsets are controversial for a reason,” Jina said. They’re useful as a stopgap measure for companies to buy themselves some time as they figure out more permanent ways to reduce the climate impact of their business operations, but if everyone were to rely purely on offsets as a solution, that’s simply not sustainable. Jina added: “There’s not enough space on the planet to offset everything.”

Though retiring carbon permits is better than offsets, he said it is “not effective at scale.” The problem with the carbon markets is that they are not technically capped, and certain markets have been known to issue more permits when prices get too high.

“Literally every single compliance market ends up over-allocating,” Cullenward said, which means that one permit is not actually equal to a ton of carbon cut.

Why climate action has to be about more than consumer choices

Cullenward has a suggestion for people who actually want to make a positive climate impact with their shopping dollars (besides, of course, shopping less).

“Probably the most effective thing you can do as an online shopper is choose very slow shipping options,” he said. That means relying less on air freight, the most carbon-intensive way to transport goods. Waiting and planning ahead to bundle multiple items in one purchase can further cut down on needless delivery trips.

Ultimately, the focus on individual consumer choice is fundamentally a distraction from the more important issue: political and corporate action on a large scale. The concept of a personal carbon footprint was, after all, popularized by BP itself. “It’s not really on you to be the solution here,” Jina said. Rather, it’s the responsibility of corporations and policymakers to make the bigger, systemic changes necessary to solve the climate crisis.

This story was updated with a comment from Cloverly CEO Jason Rubottom.

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