You remember carbon offsets, don’t you?

SUV-vs-Carbon-OffsetsYou remember carbon offsets, don’t you? When companies like Dell, Yahoo!, News Corp. and HSBC promised to go carbon neutral, they decided to do so, in part, by financing projects to develop clean energy, or plant trees, or capture methane gas from landfills or farm animals that would, in theory, offset their own emissions. In regulated markets, mostly in Europe, traders bought and sold billions of dollars in carbon credits. Carbon finance was going to be the next big thing.

That was so, well, 2007. These days, you don’t hear much talk about carbon neutral. And the price of carbon credits on regulated markets has collapsed; you can buy a credit, once worth 32 euros (about $42), for about 4.5 euros ($6) these days on the European exchange. Here in the US, cap-and-trade was rejected by Congress. Carbon offsets came under attack, rightly or wrong, as a scam.

So it came as a surprise to me to learn recently that the market for voluntary carbon credits is alive and well and growing, at least by some metrics.  A report by a nonprofit called Ecosystem Marketplace put the size of the market at 101 million tons of carbon offsets in 2012, which is up 4 percent over the previous year. In dollar terms, the value of the voluntary offset market fell by 11% to $523 million, as the prices that buyers were willing to pay fell. Even so, a not-insignificant number of companies and individuals are willing to act ahead of governments when it comes to curbing climate change. [click to continue...]

In Kenya, saving lives with carbon credits

Mikkel Vestgaard Frandsen

The Skype connection to Kenya crackles. Mikkel Vestergaard Frandsen, the 38-year-old CEO of a Swiss company that bears his family name, tried to make himself heard. His excitement is palpable.

“Watching this unfold is crazy,” he tells me. “There are so many things we’re trying out here, things we’ve never done before, things that no one has ever done before.”

Vestargaard Frandsen is a Swiss for-profit company that’s in business to save lives in the global south. Its products include LifeStraw, a water filter and PermaNet, a long-lasting bednet to protect people from malaria.

Ordinarily, it sells these products to aid organizations and governments. Then they’re given to people in need. This time, Vestergaard is trying something different: It’s directly giving away about 1 million LifeStraws, at a cost of nearly $30 million, mobilizing thousands of local people to do so, tracking results carefully and expecting to be paid back in the form of carbon credits. Mikkel’s right–this has never been done before.

How this came to pass is interesting. Founded in 1957, family-owned Vestergaard Frandsen originally produced material for work clothes. About 20 years ago, it started a line of relief products like blankets and tents. By 1997, when Mikkel became CEO, the company had phased out conventional textiles to concentrate on relief aid products.
[click to continue...]

What’s wrong with Obama’s green team?

It’s hard not to be impressed by the people working for the Obama administration on the environment. For the most part, they’re smart, well-intentioned, dedicated. Let’s hope they can deliver meaningful results soon on the issue that matters most: climate change.

Today, I’m at the Society of Environmental Journalists convention in Madison, Wisconsin. It has attracted a parade of administration officials: Tom Vilsack, the agriculture secretary, marine biologist Jane Lubchenko, who leads the National Oceanic and Atmospheric Administration; Nancy Sutley, head of the White House Council on Environmental Quality; Gina McCarthy, an EPA administrator in charge of air quality, and others. Al Gore keynoted, and we heard from economists, scientists and a CEO or two during a very full day.

tom_vilsack_1218

The boss and Vilsack

The Obama people came to sell cap-and-trade, hard. One version of a carbon regulation bill has passed the House, another’s pending in the Senate and the UN meetings in Copenhagen where a global agreement is supposed to be negotiated to replace the Kyoto treaty is just two months away.

Chances are, though, that, the U.S. won’t have legislation by then, which will make it difficult to get a global accord.

That’s because, for all the brainpower and commitment of Obama’s green team, the president has made climate change, at best, his No. 4 priority, behind the economy, health care and the wars in Afghanistan and Iraq. The Republicans haven’t helped on the climate issue, either.

To be sure, Obama & Co. have spent a  fortune subsidizing clean energy through the economic stimulus bill. But that won’t be as much help as a cap-and-trade bill with strong targets. [click to continue...]

GE and AES’s big carbon play

In Hudson, a small town nestled in the scenic Appalachian foothills of western North Carolina, the county government is capturing methane, a potent greenhouse gas, from an abandoned landfill and turning it into fuel—with help from General Electric, AES Corp. and Google.

The methane-capture project is the first significant carbon offset deal to emerge from Greenhouse Gas Services, a joint venture of GE and AES, with MissionPoint Capital Partners, that has been operating under the radar since it was formed back in January 2007. Google is the venture’s first announced customer, besides a GE-branded credit card.

Now, with climate-change regulation from the Obama administration on the horizon, Greenhouse Gas Services is aiming to ramp up its business – capturing or reducing global warming pollutants. Recently, I spoke with GHGS’s CEO, Mauricio (Mo) Vargas, who says the GE-AES venture intends to be a major player in the U.S. carbon market.

New Energy Finance predicts that the regulated U.S. market will be worth $1 trillion or more by 2020. Such estimates are little more than wild guesses, but most people who understand carbon markets agree that the U.S. market will be a huge deal.

“We’re the big dogs here,” Vargas says. “Whether that’s true today, that’s not the point. That’s where we are going. We’re going to scale this up.”

“The new administration is pushing climate change legislation extremely hard,” he says.

I met Vargas (below) at AES’s corporate offices in Arlington, where the joint venture operates. AES is one of the world’s largest power companies (132 generating plants in 29 countries on five continents) and an early player—back in the early 1990s—in the carbon business. GE is, well, GE.

Vargas, who is 38, had previously worked for GE, then did a stint at AES and became CEO of the JV last March. He’s got a MBA as well as a degree in mechanical engineering.

He told me that GHGS is pursuing several types of projects, all of which capture or prevent the emissions of greenhouse gases and thereby generatecarbon credits, which the company then sells to corporate or individual customers. Its projects include methane capture from landfills, coal mines or agricultural waste; renewable energy projects that reduce emissions by replacing fossil fuels; or land or forestry management projects that increase the capture of CO2.

“We’d like to build three or four projects with each type of technology, and see how they go,” Vargas says.

Vargas was coy about identifying particular projects to which GHGS is committed, but he said they include a landfill deal in suburban Virginia and a large project to capture methane from cow manure in Minnesota. “It’s not the sexiest of businesses,” he says, referring to the cow dung project.

For now, GHGS is selling carbon credits into the voluntary offset market. Google, for example, is buying offsets in an effort to meet is goal of becoming carbon neutral. (I searched in vain on Google’s site to see if the company has met its goal.)

Buyers of voluntary offsets, like Google, are typically doing so to enhance their reputations, so they are looking for more than carbon credits. They want to be able to talk about how they offset their emissions. So building a wind farm or creating a small-scale hydro project in a poor country has more value than, say, trapping industrial gases from a factory in China.

“They want a story,” Vargas explains. “Coal mines are releasing much more methane than an agricultural project will, but they are less attractive in the voluntary market because they are related to coal.”

The real business opportunity for GHGS will come when the company can sell offsets to companies, most likely coal and oil companies, that will be regulated under cap-and-trade legislation proposed by the Obama administration. Companies that burn fossil fuels will need to either buy allowances that will permit them to emit carbon dioxide, or buy offsets from companies like GHGS.

“Our goal has always been to go into the compliance market,” Vargas says. “The voluntary market is a warm up.”

The GHGS venture is worth watching. I’m pleased that Mo Vargas will speak next month at Brainstorm Green, FORTUNE’s conference on business and the environment.

If you want to learn more about carbon finance, I can point you to a webinar that I moderated last week for the Edelman public relations firm and the Environmental Markets Association. It’s long—about 90 minutes—but it features expert commentary from Thad Heutteman of the consulting firm PEAR, Wiley Barbour of the American Carbon Registry and Mark Grundy of Edelman. You can access the webinar slides from this link.  Here is a link to the audio.

Finally, I did a podcast with Mo Vargas for The Energy Collective that should soon be available there. I’ll post a link when it goes up.

What’s cooking at JPMorgan?

While carbon offsets are controversial and always will be, they have enormous potential to promote an elusive goal: sustainable development. At their best, carbon offsets are a low-cost way to reduce greenhouse gas emissions, transfer clean technology to poor countries and help people out of poverty.

Which brings us to JPMorgan Chase and cook stoves.

The global Wall Street investment bank has begun subsidizing the production and distribution of efficient cooking stoves in Africa, an effort that could expand to India and southeast Asia as well. The project is the topic of today’s Sustainability column on fortune.com and cnnmoney.com. Here’s how it begins:

By any measure, it is a long way from the Park Avenue headquarters of JPMorgan Chase, the global investment bank that generated revenues of $100 billion last year, to the dusty streets of Kampala, Uganda, where a poor woman can buy a new cook stove for about $6.

What connects the big bank to that small transaction is the business of carbon trading.

JPMorgan is quietly pushing the boundaries of the carbon market – a sprawling international experiment to reduce the greenhouse gases that cause global warming – by subsidizing the distribution of efficient cooking stoves in poor countries. Because the new, improved stoves save fuel and produce less carbon dioxide than traditional stoves, they generate so-called carbon credits that can be sold to companies or individuals who want to offset their own emissions.

The business is complicated, controversial and potentially very profitable.

You can read the rest of the column here.

A couple of points that didn’t make it into the column. Odin Knudsen, who runs the carbon markets program for JPMorgan, is incredibly enthusiastic about the cook stove project, not only because of its business potential but because it can do so much good. Odin, who is 65, has worked for more than 30 years on sustainable development and international finance, mostly at the World Bank, and he really knows carbon markets. He told me that one key to really unleashing the power of carbon markets will be to get programs like distributing cook stoves, CFLs or small-scale energy efficiency measures accepted by regulated carbon markets like the EU European Trading Scheme. (Sorry, but this is unavoidably geeky.) Right now, these projects, which are known as programmatic clean-development projects (as opposed to the much-bigger one-off projects, like trapping industrial gases or landfill gas) can be used to generate voluntary credits, but they have not yet been approved by the UN regulators set up under the Kyoto protocol. Credits in the regulated markets are worth a lot more than those in the voluntary markets.

Another thing I learned while reporting this column is that cook stoves are a big environmental and health issue in the developing world. I spoke by phone with Ron Bills, a business guy—he was once CEO of Segway—who now leads a nonprofit called Envirofit, which is distributing super-efficient cook stoves in India. Ron told me that half the world’s people burn biomass—wood, dung, charcoal or agricultural waste—every day, and that this creates a huge problem of indoor air pollution. Envirofit is looking to carbon finance to jump-start its business, which is now supported by the Shell Foundation, among others. Check out Envirofit here.

Dell shifts into neutral

Carbon neutral, you may remember, was the word of the year back in 2006, but as my friend Joel Makower (executive editor of greenbiz.com, aka the guru of green business) has written, no one knows exactly what it means or even how to define a company’s carbon footprint.

So when Dell announced today that the company had become carbon neutral, I decided to take a closer look in my Sustainability column at fortune.com and cnnmoney.com. Here’s how the column begins:

Dell is announcing Wednesday that it has become carbon neutral by turning out the lights in its offices, buying wind power and protecting endangered forests in Madagascar.

It’s all part of CEO Michael Dell’s commitment to make the company that he started back in 1984 “the greenest technology company on the planet.”

But what, exactly, does becoming carbon neutral mean?

It turns out that there’s no agreed-upon definition of carbon neutral, even as rock groups like the Rolling Stones, events like the Super Bowl and the Oscars, and a growing number of companies have set carbon neutrality as a goal.

You can read the rest here.