Carbon Credits: False Absolution
Carbon credits trade actual pollution for a hypothetical reduction in the uncertain future
July 1, 2007
Fred Foldvary, Ph.D.

A fundamental principle of morality is that good does not cancel evil. Yet this is what advocates of carbon credits seek to do. They think if a person pollutes the environment, this evil is cancelled by paying for activities that benefit the environment.

I have previously ridiculed the concept of carbon offsets or carbon credits. But now that Vatican City has engaged in this scheme, this issue needs to be expanded on.

Vatican City, the world’s smallest country and the headquarters of the Roman Catholic Church, has announced that it has become the first “carbon neutral” green country, the first sovereign state to be environmentally correct. But it has not done so by minimizing pollution. No, the Vatican has become “green” by obtaining carbon credits from Planktos/KlimaFa to supposedly offset its pollution.

Vatican City did not even have to buy the credits. The Planktos company donated the credits. The company calls itself the “world's leading ecorestoration firm.” It plants “climate forest parks" with its European subsidiary KlimaFa. It is one of many firms now seeking to profit from carbon-dioxide credits. There has also been a Planktos Foundation in California.

The concept of carbon credits was initiated by the Kyoto Protocol, which authorized a market in tradable polluting permits. A polluting firm can buy a permit by paying for projects that absorb carbon dioxide. But you don’t have to be a country or a business to buy credits that absolve you of environmental sin.

You too can go to Planktos and buy credits that offset your pollution from burning wood, from your backyard barbeque, from your old car, or from smoking cigarettes. Go ahead and pollute as much as you like! You can buy your way out to environmental salvation. Figure out your pollution with a carbon footprint calculator and then buy yourself an environmental indulgence. They take credit cards, and ¡se habla español!.

To be fair, I’ll concede that if there is new plant growth that would not otherwise take place, or if one saves plants that would otherwise be destroyed, and if the plants do in fact absorb as much carbon dioxide as the perpetrator emits, and if there are no other pollutants that are emitted or other environmental harm by the operation, then the activity is carbon-neutral. However, there are problems in the execution, and problems in the very concept.

For carbon credits or offsets to be effective, the beneficial environmental activity would need to be certified by a trustworthy organization. Otherwise the firm or nonprofit organization that provides the credits can exaggerate the benefits, or even commit fraud. Indeed, some organizations sell offsets that are supposed to take place in the future, rather than actual present-day reductions. One trades actual pollution for a hypothetical reduction in the uncertain future.

Carbon offsets involve not just planting trees but also fertilizing the oceans. Planktos seeks to dump hundreds of tons of iron ore into the ocean more than 350 kilometers to the west of the Galápagos Islands. The firm states in its website, “We revive plankton populations by adding iron dust to the ocean.” The firm explains that “There have been eleven major iron enrichment experiments conducted around the world since 1981. These experiments have confirmed iron as the limiting factor for plankton growth and have demonstrated the ecological success of inducing open-ocean plankton blooms.” In response to critics, Planktos points out that “wind storms from the Sahara blow over 100 million tons of fine mineral dust across the Atlantic each year, which annually ‘fertilizes’ the mid-ocean with nearly 3 million tons of hematite iron.”

But many environmental organizations, biologists, and reporters question whether this project would work well, and indeed whether it would instead damage the environment. They note that all the consequences of iron enrichment are not yet fully understood. Iron is not the only nutrient that plankton requires, so the artificial addition of iron may not have the same effect as the natural spread of iron from blown dust. Also, carbon dioxide is only one of several pollutants greenhouse-gas, and carbon offsets will prevent the reduction of polluting activities by providing an alleged substitute.

Biologists have long known that the introduction of exotic species and elements into an environment can have damaging unintended consequences. The best rule for the environment is to avoid fooling with mother nature. The direction of reform should be to restore the natural environment rather than to engage in interventions to offset previous interventions. Massively interfering with an ecology is like government intervention into a free market; the interfering agent cannot possibly know the long-run effects of altering a complex dynamic system.

The optimal environmental policy is to reduce pollution by making polluters pay for their damage. Doing good elsewhere is not compensation; the compensation should be in the form of money paid to the victims. If a thief steals, the morally proper restitution is money paid to the victims, including a payment for the cost of the stolen goods, the trauma and personal value of the goods, the costs of a trial, and as a punitive deterrent, plus perhaps prison with rehabilitation. If a thief donates the loot to a good cause, this does not offset the evil of the theft, because the victim is still harmed. Even restitution to the victims does not offset the evil, but only reduces the harm done. The evil of theft can never be erased by any action.

So too the theft of stealing the health of the environment form its owners, the people and other living beings of the world. The evil of pollution does not get erased by doing good. Carbon credits add to pollution by reducing the incentive to actually reduce pollution. Just as several hundred years ago the indulgences from the Catholic Church could not really absolve evil acts, so to today, the Vatican City or anybody else cannot really be absolved from the sin of pollution with the purchase of credits. For true absolution, either reduce your pollution or compensate society for the damage.

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Fred Foldvary, Ph.D.

FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.