03/18/2010 05:12 am ET | Updated May 25, 2011

A Lot of Bogus: The Story of Offsets

"The Story of Cap-and-Trade," a short animated video from the team who brought us the wildly viral "Story of Stuff," has been generating LA-scale traffic on green blogs in the last week. While some of the criticisms have merit (especially on the realpolitik of getting climate legislation past the fossils in Washington, DC), many are not, and none are sillier than the argument that the video simplifies the issue.

Er, yes. I've got four linear feet of shelf space in my office and God-knows how many megabytes of disk space taken up with reports and newsletters just on international offsets. Doing analytical justice to the overall issue of carbon trading in a nine-minute cartoon would be like trying to fully explain the origins of the First World War in a tweet.

But if anyone does want a more comprehensive analysis of offsets (without having to read a small forest's worth of reports) I strongly recommend "Carbonomics," a recent episode of the HDnet cable show Dan Rather Reports, hosted by the eponymous renowned news anchor.

In the 50-minute show, Rather covers three important elements of the actual and proposed offsets market: the voluntary market in the US (where individuals and companies buy offsets because it makes them look good or feel better); the international regulated market (where governments and companies buy credits to comply with their Kyoto Protocol commitments, and, in future, probably US climate law); and forestry and farmland credits which are currently mainly voluntary but are likely to become regulated under proposed US and UN schemes.

While giving lots of space to the arguments of offset supporters, the conclusions are pretty clear that actually existing offsetting is largely a crock. In the "voluntary" section of the episode, our man Dan visits a landfill in New Jersey that profits from trapping the climate-wrecking gas methane from rotting garbage and using it to generate electricity. After the landfill had installed their methane trapping equipment, the dump's manager explains, they then got an offer from the Chicago Climate Exchange -- the CCX -- to give them money. Not surprisingly, the manager said "yes, please" and the dump now gets thousands of dollars every month for doing exactly nothing.

Meanwhile the CCX profits from selling the imaginary "emissions reductions" from the landfill to "offset retailers" who then sell them on to companies or individuals who are fooled into believing that their offset purchases help reduce climate pollution.

The multi-billion dollar international offsets market is dominated by the Kyoto Protocol's Clean Development Mechanism. While this market is regulated -- by a UN-appointed board that tries to verify which projects actually reduce emissions, and by how much -- Rather suggests that much of its funding is also going to bogus offsets that involve paying developers to do what they were going to do anyway. UC San Diego political scientist David Victor, who has closely studied the CDM, tells Rather:

"Its hard to know exactly what fraction of these credits is bogus. My best guess is that something like half of these credits absolutely do not represent reductions in emissions beyond what have occurred otherwise. Depending on how you do the numbers, that fraction could be as high as two-thirds or maybe even higher than that."

To which Dan responds:

"That's a lot of bogus."

Research by my own organization, International Rivers, on bogus emission reductions from Chinese hydro dams, is also featured in the show. I'm interviewed about the Xiaogushan Dam, which has been approved to sell CDM offsets. These offsets are being bought by German utility RWE, one of Europe's worst climate polluters, to enable it to continue burning dirty coal.

The World Bank helped the Xiaogushan project developers get offset income by persuading the CDM that the dam would only be built if the developers could get this income, and that if they couldn't sell offsets, more coal would be burned in China. Yet at the time the World Bank applied to the CDM, the dam was already well under construction and slated to be completed regardless of whether or not they could sell offsets. So no emissions decrease in China, and an increase in Germany (equal to the emissions from 50,000 cars). Not a smart recipe for dealing with the climate crisis.

The episode also explains the huge scientific uncertainties that bedevil efforts to quantify exactly how much carbon is locked up in a forest or farm and the resulting climate benefit. These uncertainties are usually pushed under the rug by offset promoters. The shaky science of swapping trees for pollution, and a number of other intertwined political and technical issues that are not covered by Dan Rather, render any land-based offsetting extremely risky in terms of its climate impacts - and its consequences for traditional communities that depend on access to forests for their livelihoods.

Unfortunately "Dan Rather Presents" can't be streamed free on-line. But you can pay a measly $1.99 and download it from iTunes (search "carbonomics").