.

To my knowledge Terra Pass works by using a contributor's dollar to fund alternative energy projects (such as wind power) in an amount equal to what the contributor's car would emit. So though the contributor is not gaining access use to the alternative energy directly, they are funding the project for someone else's use thereby offsetting their own emissions. Whether or not it's a perfect system I'm not sure, but conceptually it's a great idea for those that don't have access to purchase alternative energy directly or have enough money to fund an alternative energy project for their own residence in order to offset their emissions.

 

<div class='quotetop'>QUOTE(naterprius @ Jan 11 2007, 12:52 PM) [snapback]374167[/snapback]</div>

I guess that's my conclusion as well, though I'm not quite as sure about it.

When I first heard of outfits like this, I got interested, because I had this hazy notion they were purchasing rights that would otherwise be used to emit pollutants under the EPA cap-and-trade system (http://www.epa.gov/airmarkets/trading/index.html)

Oh for dumb -- cap and trade doesn't cover carbon. That's for sulphur and nitrogen oxides. If it covered carbon, that would mean we already had some sort of federal GHG policy in place. Nope. So you can buy the rights and thereby reduce aggregate emission of SO2 and NOx (for a year), but there's no enforcement mechanism for carbon. Which should have been obvious but somehow didn't register.

So when I found out these carbon-offset sellers were -- I don't know -- investing in alternative energy or growing trees or whatnot, I pretty much lost interest. Not that those aren't reasonable things to do, but as you said, they don't sequester fossil-fuel carbon on a fossil-like timescale.

I didn't even consider your timescale, but even on a human timescale, the numbers for forest sequestration appear fairly large.

The EPA says an acre of fast-growing US southern pine forest can absorb about a ton of carbon a year. That's probably an upper bound, and only occurs at the peak of growth. But take that as a guide.
http://www.epa.gov/sequestration/faq.html#4

I calculated that my family's domestic consumption amounts to about 22 tons of C02, or 6 tons of carbon.

So, if I bought six acres of otherwise bare land suited for southern pine forest, and devoted it to forest that would otherwise not be grown, put a covenant in the deed that it couldn't be cut down, and put up a fund the pay the taxes in perpetuity -- yeah, I could at least pass the carbon on to my grandchildren. Cleared agricultural land on the Northern Neck of Va was going for around $4K/acre, last I looked. That would be about $24K to buy, another $24K in t-bills to pay the taxes and whatnot, and a few K to get it planted and running.

So, I figure it might cost me $50K or so, to let me feel like I had displaced my family's carbon into the hazy future, up to the point where the forest matures and decay offsets growth (maybe 90 years). Even then, the carbon remains in solid form as long as the forest remains standing in equilibrium. Putting it that way doesn't sound too bad. Reduce my net C02 emissions to zero for $50K and no lifestyle change, and give my heirs a free carbon ride to the year 2100.

Or hey, for the same money, I could buy a Hummer.

But it sure ain't no $80 fee. And it's only $50K because our emissions are below US average, and I'm not pro-rating our share of the rest of US emissions, just direct household consumption. If I plugged in US average figures (net carbon per capita), I think I'd get something closer to a $200K investment, to be carbon-neutral, with no lifestyle change, to 2100. Again, a far cry from $80.

And, as you say, it's not forever. The forest would reach maturity in 90 years or so, stop absorbing carbon -- and whether or not it releases that carbon depends on how long you can keep the forest standing.

Still, it slows the progress of climate change, gives us time to think.

But if I wanted to do that, I'd do it myself. I don't think I'd trust such an unauditable thing to a third-party provider of such services. And realistically, I wouldn't pretend I'd solved the problem forever. Just maybe bought a little breathing room hoping somebody will solve it in the future.

How about as a US strategy on the same numbers? Six acres per family of four would be .... 7% of US land area. Using US average carbon figures, though, it'd be 28% of US land area, as a one-time investment, to reduce net US carbon emission to zero, for the existing population, for the life of that forest. Doesn't seem even remotely feasible to generate that much new forest -- there's not that much arable unused land in the US. We couldn't do that and eat too.

But that's for reducing net carbon emission to zero, for the current US population. Suppose we only want to offset the growth - reduce emissions growth to zero. My understanding is that carbon emission grows about 1%/year (based on fossil fuel sales statistics from the US EIA). So we'd need 1% of that, or to devote a quarter-percent of the entire US land mass to new forests each year, to offset our carbon growth.

Call it ... ah ... 30,000 square miles of new forest per year, to offset existing US carbon emission growth. (That's more than 0.25% of the 9+M sq miles in the US, but that's what the calc says.) That's about a quarter-acre plot per person per year, of new permanent forest growth, to offset US carbon emissions growth. For the cost calc above, I think that works out to $2K/year/family of four (unless I screwed up the calculation, entirely possible on the fly like this).

Seems like there ought to be a cheaper way to do it, but it's nice to put an upper bound on it. Not that I'm advocating this, but grossly speaking, a $2000 tax per family of four, devoted to increasing US forest area, would stop our carbon emissions growth. That wouldn't be efficient but it wouldn't be the end of the world either.

But fundamentally I agree with you. In all likelihood, at best you pass your carbon on to some future generation, and get us a little more time to assess the situation. You can't pretend it's a permanent solution. And I don't see how $80 buys you much of anything.

 

I have terrapass for my Land Rover and 328XI bmw...

and one is coming in the mail for the prius...

 

Where are you guys getting the planting of trees? Terra Pass uses your money to invest in wind farms and bio mass projects that others (maybe corporations???) use for their energy to the same approximate degree that your car emits carbon. It's an immediate offset, so far as I can tell. What's all the talk about future generations? What am I missing?

If Terra Pass type platforms didn't exist, there would be no way for a consumer to offset their carbon, short of investing in alternative technologies for their direct use. It may not sequester what's put out there, but it allows for others to utilize an alternative energy source to limit their output (read less sequestering necessary). As long as there's no fraud, I see no downside to this.

 

<div class='quotetop'>QUOTE(SSimon @ Jan 11 2007, 02:50 PM) [snapback]374270[/snapback]</div>

I didn't know the details of terrapass in particular. I just knew that some advertised sellers of carbon credits do alternative energy, some done sequestration. Mostly, I wanted to do the calculation for trees.

OK, now that I look at Terrapass, I'm not substantially more enlghtened, but I'm getting there.

They trade on the "Chicago Climate Exchange". So far so good. What the heck is that?

This gets back to my earlier confusion (see prior post). I had heard some of these firms bought carbon credits, but .. there's no actual carbon restriction being enforced in the US. So, what the heck is this? The solid fact here is that there is no mandatory carbon credit program analogous to the EPA cap and trade system.

I'm an economist, and it's taking me a while to figure out what they do. They are not exactly forthcoming on key details. Here's how I work it out.

The key phrase, from the Chicago Climate Exchange website:

"Members make a voluntary but legally binding commitment to reduce GHG emissions."

So, the CCE consists of companies that have already decided to reduce the GHG emissions. Gven that, as an economist, the more I read of this, the more uneasy I get about the potential for money spent here to result in additional GHG reductions beyond what would have taken place anyway. These companies volunteered to do this. Hold that thought.

Now look at the other angle, that "green producers" of various types can get money out of this rig. How does that work?

Take wind farms. My understanding is that large-scale wind electrical projects are essentially profitable under existing circumstances. I mean, there's a bunch of them now. Similarly, (based on an earlier thread hear, prompted by Tripp), feedlot methane digesters have also become profitable.

But looking at the Terrapass site, on the wind energy blurb, they didn't say that they BUILT a new wind farm with the money, to result in new carbon avoided, what they said is that they purchased "carbon credits" from existing wind farms. Here's thir blurb:

"In the last year TerraPass has purchased credits for nearly 1,800 tons of CO2 from the McNeilus Wind Farm alone. That's equivalent to the amount carbon emitted by about 400 mid-size cars in a year. We think that's definitely driving in the right direction.

TerraPass purchases and retires Green-e certified renewable energy credits from wind farms across the country. These wind farms generate electric energy that might otherwise come from the burning of coal or oil. In this way, Wind Power takes CO2 emissions out of the energy producing cycle. And that combats global warming."

So far, I'm not quite getting it, but I'm getting there. Waht is a Green-E credit? What does it cost to get one? Are they a once-in-lifetime thing? Key concept: Is there any limit on "green-e" credits?

Again, no. As far as I can tell, Green E just says yes, you produced such-and-such wind power this year, which would have cost so-and-so carbon if generated from traditional sources. It is, as far as I can tell, merely an accountingn device. You pay the paperwork fees to get the certificate. It creates these credits solely so that the producers can't double-count the amount of carbon their production avoids. Hold that thought.

Now let me get back to the Terrapass wind farm blurb. The way I read this, these wind farms are already producing electricity. Terrapass isn't claiming they helped build the wind farms. They're just paying them more, for the elecricity that they already are generating. Green-e is providing the accounting services, so they don't sell the same credit twice. That is, in fact, the way I read the CCE rules -- if you have an operating project that's already working, you apply and they give you some money for the carbon that you're already avoiding.

Well, get to the punchline: how much did Terrapass pay that windfarm? Notice, please, that there's no dollar amount ever mentioned on the site. Pretty good guess that if they'd shucked out a bundle, they'd be the first to tell you. OK, how much cash changed hands?

The CCE lists the 2004 (latest figure I stumbled across) market price of a 1 (metric) ton carbon credit at about $2. Terrapass bought 1800 tons from that wind farm. Do the arithmetic. Terrrapass paid out roughly $3600. I suspect that's why they don't mention it on the website. I don't know about you guys, but I'm underwhelmed. I mean, I know people who just plain donate more than that in a year to environmental causes and the don't even get a bumper sticker for it. And claim credit for 400 SUVs? That means they paid $9 per SUV for the carbon credit, which they then sell at 1000% markup when they retail it.

I'm sorry to be a skeptic, but this has a strong make-believe element to it, in my opinion. There is no limit to the amount of incoming credits that can be produced, and those credits merely certify (e.g.) the amount of onging annual energy production, not new energy production. Re-read the "voluntary" part above. And, now that I've done a bit of math, I think the only thing that makes this work is that the dollar amounts involved are trivial. And that's how they can apparently offset your SUV so cheaply. But the concept that their $3600 payment to a wind farm was somehow responsible for the electricity having been generated does not appear to be credible.

It's noble, it's a righteous thing to do, it's a move in a positive direction, but I'm not seeing real impact here.

If I had to characterize it, in a way that made real-world sense to me, I'd say this. This is a system that organizes small charitable contributions to existing, presumably profitable clean-energy and carbon-avoiding businesses. The payments involved do not seem to be even close to the amount required to induce more green energy production. Basically, this works by allowing existing green energy producers to (small!) credits for the energy already being produced. The firms who volunteered for the CCE membership undoubtedly get some PR out of it, but in addition, get to claim credit for carbon reductions at exceedingly low cost. They don't actually have to generate new carbon savings. All they have to do is pay the market-clearing price for the existing stock of credits, which are available to all existing ongoing green producers merely for the "paperwork" cost of paying the fee to become Green-e certified.

As far as I can tell, the only limitation on the stock of potential offset credits, relative to the size of the market, is the paperwork and hassle cost of obtaining the Green-E or other certification for your onging, existing clean energy business. In other words, what you are looking at here is, in my opinion, not the cost of carbon avoidance, what you are looking at in the Terrapass fee is, in effect, the highly marked up cost of complying with the voluntary accounting and regulatory apparatus that has been set up among green energy producers.

Given the voluntary nature of the initial CCE membership, the fact that any existing green producer can sign up for a slice of the money, it's an interesting economics experiment, but the fact that the price of the credits hasn't fallen to zero tells me that there really isn't a heck of a lot of money involved for the average green producer. The calculation for the wind farm, as posted on the terrapass site, confims that.

I'm sorry to be negative. There's a reason they economics is called the dismal science. I just stumbled across this -- I'll study up on it a bit more and repost -- but for now, please don't flame me back, but if you know more about how this actually works, I'd like to hear about it please. I will change my mind if the facts warrant. But so far, all I've done is solidify what was before just a general uneasiness about the concept. To the limit of my current understanding, I believe this is noble and reasonable and on balance a good thing, but I don't believe it effectively reduces carbon emissions. In the main, it appears to provide very small subsidies to firms already in clean energy and other carbon-reducing businesses.

 

Here's what I know. Terra Pass uses the money from individuals to actually fund alternative energy projects. Terra Pass is not actually the entity building these projects, they just supply funds gathered from individuals that enroll for this purpose. Of this, I am sure.

However........

This is all probably an over simplified explanation since I'm about as confused as you concerning the energy credits. I believe that they get these in return for the funds contributed for the construction of the project, kinda like a receipt.

and

I cannot comment on how these credits are valued which is, it seems, key to providing you with a sound argument for my support of Terra Pass. Shame on me.

If this is a legitimate operation and if one's investment can be quantified acceptably, an individual is able to sway the energy sector towards implementation and use of alternative energy and away from conventional energy. It's a vehicle that renders the cost of construction less costly thereby making it more readily available.

In the end, my Prius was under $30/year to offset my emissions. Though I wouldn't like to be "taken for a ride", it's a small price to pay for peace of mind that I may be doing something worthwhile like bringing alternative energy to market. Since I don't have a bundle of money to support alternative energy at my residence, it allows me the opportunity to support it on a broader scale. There has to be some kind of a driving force/demand for alternative energy or it will stagnate no matter an individual's (or collective's) best intentions.

If you happen to find anything out with further research, repost. I'll try to find out more about the credits as well. Are you aware of any other programs with a like mind/intention that you support?

 

<div class='quotetop'>QUOTE(SSimon @ Jan 11 2007, 07:44 PM) [snapback]374468[/snapback]</div>

I will do that. I haven't found anything I like, though I have not looked hard. This is why I was interested in pricing out the do-it-yourself method with new forest growth, and why this thread caught my eye.

I think I'm getting a handle on it, but every time I put numbers to it it makes no sense. By contrast, if you read the EPA website for cap-and-trade, it's crystal clear how it works, why, and how much they've reduced emissions. That's why I can't quite get this, I guess.

And, really, the prices just seem to way too low to me. Take the EPA website. SO2 is a trace component of flue gas, and the EPA rights to emit are currently selling at $200/ton. CO2 IS the flue gas, and I'm to believe that C02 avoidance is sellling for $2/ton? That just doesn't seem quite right, and the more I work with that figure, the less reasonable it looks.

Two examples then I have to get back to work.

What's the value of avoiding all (total) annual US C02 emissions, at that price? Total US emissions of C02 (6,800 million tons of C02) amounts to about 1800 million tons of carbon, which, at $2/ton, comes to just under $4 billion dollars. That's rounding error in the Federal Budget. Even understanding that it's priced at the margin, and that there's low hanging fruit, and that price would go up as more carbon was abated, and so on -- that still doesn't strike me as anything like a real price.

Look at the Prius -- 15000 miles a year = 300 gallons of gas x 5lbs carbon/gal = in the neighborhood of a ton of carbon emitted. So, $2 to avoid all the carbon in 300 gallons of gasoline? I mean, $2 will buy me a day's worth of electricity. I estimate the carbon savings from turning off my electricity for a day as 12 lbs. Look at the apparent cost-effectiveness ratio. Have they really found a method for carbon avoidance that's more than 100x as cost-effective as just turning off my electricity and not using it? I'm doing a bit of fuzzy-thinking there, but I keep coming back to the conclusion that the posted prices on these carbon avoidance credits are off by a large margin, relative to the cost of actually reducing carbon emissions.

Flipping that the other way, I'd have to turn off my electric for nearly half a year to save a ton of carbon. But a ton of carbon avoidance trades for $2 on the CCE.

Now, that could be entirely wrong. Wouldn't be the first time. But in fact I don't really know anything but what I read today. I will continue to research and get back to you. Surely somebody has already worked this through from A to Z and can explain the low price in a nuts-and-bolts way, like the EPA cap-and-trade site.

 

I looked at the electricity generation angle on this issue, to the point that I completely understand it. I now have the exact straight story on this, in so far as I care to investigate it.

I'm not sure you want to hear it, but here it is anyway.


Terrapass is best thought of as making a small, organized charitable contribution to alternative energy providers. The provider can be for-profit or not-for-profit.

Despite their rhetoric, Terrapass most ephatically does *not* sell you an actual net reduction in C02 released into the atmosphere, and your purchase does *not* result in a reduction of aggregate C02 released into the atmosphere. (I will soften that statement a tiny bit below in a discussion of the possible indirect effects these small charitable contributions may have, but in the context of "buying tons of C02 avoided", as if there were a hard relationship between Terrapass dollars and tons of carbon, the prior sentence is correct.)

The best way I can describe it is in terms of "naming rights". (You know what I'm talking about here -- a city builds and operates a $400M stadium for pro sports, and a company pays the city $5M to put their name on the stadium.) What Terrapass sells you is the "naming rights" to an existing ton of C02 avoided. It's there, it was the byproduct of electricity *that somebody else caused to be produced by buying the actual electricity*. What you are buying is the right to call that avoided ton yours. Same as Fedex didn't cause the stadium to be built, they just paid a tiny bit more to put their name on an existing stadium.

If you're familiar with charities that ask you to "adopt" something -- an acre of rainforest perhaps -- then give you a certificate of adoption -- well, this is completely analogous to that. Through terrapass, you have adopted so-and-so many *existing* tons of avoided C02. Your adoption does not purchase the acre of rainforest, nor does it generate an additional avoided ton of C02. You just get to, I have no other way to say this, so I apologize in advance -- you just get to pretend that it's yours.

So this is, in fact, a small charitable contribution, made to a green energy producer, and made on the basis of the fact that this producer produces electricity in a carbon-free way (to continue the electricity example).

Thats a good thing -- no debate from me here. But it is not a purchase of an actual reduction in C02 production..

So, what is it, exactly, that Terrapass has sold you?

OK, here's the story in full detail.

Start with Green-e

http://www.green-e.org/gogreene.shtml

Green-e certifies green energy (electricity) production. Costs $4K/year and up to get certified. Certification allow some buyers to be assured that the energy was produced in a green way, how much was produced, and how much carbon was avoided.

In addition, once Green-e certfied, the producer generates both the electricity and "renewable energy certificates". The renewable energy certificate or "green tag" is the statement that (e.g.) 1000 KWH of electricity was produced, and avoided so-and-so much carbon doing so. So, as the green generator generates and sells electricity, they accumulate these (in effect) pieces of paper verifying that they have done so.

Here's the Green-e wesite defintition:

"
Renewable Energy Certificate (REC)
Also referred to as green tags, tradable renewable certificate (TRC), green credits, or renewable energy credits. An authorized document or other representation (electronic, paper, etc.) that represents the bundle of attributes associated with the generation of a defined amount of electricity (usually one megawatt-hour [MWh]) at a renewable energy facility. The bundle of attributes has been separated from the renewable electrical energy and, as such, the REC acts like a form of currency that allows the environmental attributes of renewable energy generation to be separated from the electricity commodity and to be sold as a separate product. Depending upon the facility, the REC will embody various attributes with varying quantitative values. However, for the purposes of the Green-e Renewable Electricity Certification program, a REC must contain all of the environmental attributes associated with a unit of renewable generation, with the exception of cap and trade pollutants, as described in the Green-e National Standard.
"

That's a lot of claptrap, but what they're saying is that they carefully account for the environmental benefits of each 1000 KWH produced, produce one such document per 1000 KWH, and *that document* is made available for sale. The producer can sell *that document*, in addition to selling the electricity. To whomever would care to purchase it, for whatever reason.

What you bought, from Terrapass, are those documents (certificates), retail. For whatever it's worth. Terrapass buys them wholesale from the electricity producer, and retails them to you. That's the business they are in.

Now, the full scope of what Green-E does is far more sensible than that. In fact, Green-e mentions "three ways to buy green electricity"

"
o Renewable Energy Certificates (RECs) - are created when a renewable energy facility generates electricity. Each unique certificate represents all of the environmental attributes or benefits of a specific quantity of renewable generation, namely the benefits that everyone receives when conventional fuels, such as coal, nuclear, oil, or gas, are displaced. What you pay for when you buy renewable energy certificates is the benefit of displacing other non-renewable sources from the electric grid.

o Competitive market electricity options - in some regions, electricity markets have been deregulated and customers can choose an electricity provider other than their electric utility. Many of these competitive suppliers offer a renewable energy option.

o Utility green pricing programs - allows electric utility customers to choose to purchase some or all of their electricity from renewable energy technologies directly from their utility. About 600 or the nation’s 3000 utilities offer this service.
"

The second and third options actually do cause a reduction in C02. They are ways for you actually to purchase electricity from these suppliers, via your electric utility. To the extent that those purchases displace fossil-fuel-fired electrics, then yes indeed, those reduce C02.

So, my take on this is that Green-e's main line of business is certifying power producers so that they are eligble to participate in the second and third options. That's the meat-and-potatoes, that the business that really has an impact on net carbon -- getting people to buy clean electricity, via their utility. The first one-- the certificates -- is buying these pieces of paper that get produced, when somebody else actually bought the clean electricity.

Now, Green-e doesn't actually sell those certificates -- known as green tags. To see how a seller describes them, go here:

https://www.greentagsusa.org/GreenTags/index.cfm

They still present a lot of fuzzy-think, but they are at least reasonably clear about what they are selling. For example, apparently a lot of people buy green tags as alternative Christmas presents, if you will. It's a nice gesture.

Here's their description:

"
Are You Aware that the Average U.S. Household Produces More than 35,000 Pounds of Greenhouse Gas Every Year?

Through normal activities of using electricity, heating a home and driving a car, each of us is responsible for adding carbon dioxide and other emissions into the air we all breathe. Annually, the activities of an average U.S. household can result in more than 35,000 pounds of CO2 and other pollutants. Carbon dioxide emissions are the leading cause of global climate change.

What Can One Person Do?

You can offset the polluting effects of your energy use by supporting the development of clean renewable energy. Most traditional power generation relies on burning fossil fuel. Every time we replace existing power with wind, solar or another renewable resource, your electricity pool becomes a little greener and that benefits everyone.

It's Easy - Buy Green Tags Now

Green Tags are created when wind power or other renewable energy is substituted for traditional power. The result is a shift away from our dependence on burning fossil fuel to produce electricity. Using clean renewable energy is friendly to the environment and reduces emissions of carbon dioxide and other greenhouse gases. Green Tags represent the real savings in carbon dioxide and other pollutants that occur when green power replaces burning fossil fuel.

Renewable energy is still a little more expensive than buying traditional power so Green Tags are purchased in addition to the electricity that you are now using. Buying Green Tags has the same effect as buying green power. Both replace fossil fuel generators with clean renewables, and both have exactly the same environmental benefits.

BEF Green Tags are a renewable certificate product. With the purchase of every BEF Green Tag, you are buying the environmental or "green" attributes (i.e. benefits) of 1,000 kilowatt hours of electricity from new renewable resources. You will continue to receive a separate electricity bill from your utility. A purchase of BEF Green Tags supports new renewable electricity generation, which offset the environmental effects of burning coal, gas and other fossil fuels in the 15 Western States. (The term "new" indicates renewable generators that first started operating on or after May 1, 1999. These facilities help to shift the overall energy mix toward more renewables and less burning of fossil fuels.) In addition, BEF Green Tags help build a market for renewable energy, reduce global climate change, and may have other environmental benefits such as reducing regional air pollution. For additional information on the specific facilities that generate BEF's Green Tags, click here.
"

Notice the careful wording: Green tags support renewable energy, and renewable energy (in general) offsets the environmental impacts from fossil fuel buring. They very carefully and very correctly NEVER state that your dollars actually purchase any one-to-one or metered reduction in total C02 emissions. They carefully do state that you dollars support alternative energy in general.

Specifically, they'll sell you a 1000 KWH green tag for $20. What that means is that some portion of that $20 is a charitable contribution toward some firm that is in the business of producing green energy.

So, just to take this home, even though the tag says 1000 KWH, and you paid $20, buying the tag does not mean you bought 1000 KWH of electricity. That's obvious. But it also means that you didn't buy any tons of carbon avoided either. The guy who bought the electricty bought the tons of carbon avoided. For $20, you bought the naming rights to those tons of carbon. In my naming rights analogy, the guy who bought that green electricity is the city who built the stadium, the guy who bought the green tag is the corp. who paid for the naming rights.

Two more things to say.

First, I'll note that the dollars here square up about the same as the electrical example in my prior post. There, Terrapass paid (my estimate) $3600 to the generator. I looked them up, and at $0.03 per KWH, their annual revenues from electrical generation were on the order of $2 million.

Here, notice that you've bought the naming rights, at retail, to 1000 KWH of electricity. In Virginia, that's about $100 worth of electric. Given the high overheads of most charities, I'd guess that $5 of that $20 might make it to the electrical producer. If so, that would be a quite substantial contribution *if that producer was able to sell all of his green tags*. But it's certainly nothing like the cost of the electricity.

Now, the extended economic discussion.

Yes, if enough people buy green tags, it sweetens the pie for alternative energy in general, and producers considering starting (eg) another wind farm could count on that additoinal revenue stream when making the profit and loss calculation. So, yes, in that hazy sense of modestly improvign the overall profitability of alternative energy, this, like an other charitable contribuition, may encourage more of that activity to takes place. But, again to be clear, there is no direct, accoutable relationship between the dollars of green tags bought and tons of carbon avoided.

Second, as long as there are far more green tags than there are buyers for them, then your purchase of a green tag does not spur incremental production from an existing alternative energy producer. In other words, until they actually run out of green tags from the electricity they are currently producing, the green tags don't provide them any incentive, in isolation, to produce more electricity.

Finally, I will admit that if you have a strapped, not-for-profit, whose goal is simply to produce as much mooney-losing green energy as they can afford to produce, then in that situation, yes, your charitiable contribution to such an entity would allow them to produce more electricity before running out of money. I think that's unlikely/stretching things a bit to take that as a model of what the typical Terrapass dollar will do.



So, in some sense, the contributions may reduce C02 production in the long run. But the tons they put on the green tag are not the tons being avoided, any more than the KWH on the tag was electricity that you purchased. The tons on the tag is just a way of accounting for those tags, not a way of accounting for an actual net reduction in C02 released. In reality, given that there must be far more green tags produced than sold, the actual effective purpose of the tons on the green tag is as a marketing tool for this charitable contribution. In the same way that you can adopt an acre of rainforest, you can claim a ton of avoided C02.

 

Well, isn't it getting harder and harder to go green?!?!?!

I cannot directly purchase alternative energy sources from my suppliers - because they don't offer them (I've called Com Ed twice). I enrolled in Terra Pass as a means of offsetting the unavailability of green energy to me. However, the dynamic you outlined isn't favorable to me. I do not wish to claim ownership of alternative energy already purchased by someone else. I want to directly offset my own emissions OR to reduce my emissions (and I cannot afford panels or house a wind farm).

For the record, Terra Pass will tell you that they fund alternative energy projects. In retrospect, this can mean several different things but if one doesn't have knowledge of what you've outlined, one can take this to mean that "they FUND alternative energy projects". Isn't this some level of fraud (thanks to the OP for initially posting this topic - even though I don't like your position on cats)? Anyhow, it seems a much better solution to find a public offering by a green utility and all of us Terra Pass members march on over there with our money. Wouldn't this make more sense - to directly fund a green utility or just give them a charitable contribution directly since I'm throwing this money away anyway?

I'm dissapointed but happy to be enlightened.

Thank you. It seems you spent quite a bit of time on this. Maybe this page should be bookmarked as I'm sure a lot of Prius owners are inclined to try to make an even further effort to try to reduce their emissions.

 

<div class='quotetop'>QUOTE(SSimon @ Jan 13 2007, 12:06 PM) [snapback]375159[/snapback]</div>

It is an interesting subject and I thought it was worth the time. Although the length of the post is more a reflection of the fact that I like to write than of the time spent.

Also, I have learned some key facts from your post. Virginia Power (local electric utlility) offered some sort of consumer choice pilot, but it was advertised as opening opportunities for cost savings. No mention was made of the potential to buy green. In fact, a major portion of it was to allow the State Corporation Commission (usually referred to here as the State Corruption Commission) to get low bids from electricity producers. In other words the main thrust of it was to keep choice out of individuals' hands, but give the SCC the power to negotiate contracts with providers other than Va Power.

Based on your comments I did some research and the Federal Government says I can buy green power, in Virginia, from Pepco (the Maryland/DC power company). I didn't know that. Oh for dumb. I hope it's not just the close-in 'burbs. And if I can't, I'm surely going to start writing letters to the Governor over opening up a green retail choice for electric consumption here in VA.

I mean, I know Va Power did its level best to bury the concept, despite legislation forcing it. And to tell you the truth, I never understood the worth of it -- I figured it was a way for retail customers to get screwed covering VaPower's fixed costs, while large commercial customers bought elsewhere. But now I see that it could be used to allow me to direct my electric utility dollars into the pocket of a green producer, and displace Va Power (largely coalfired) output. That's really cool. Not just for me, but why not let that happen in a big way, if feasible? I'd pay a reasonable surcharge to buy green -- but Virginia's plan is entirely oriented toward minimizing costs. Only by accident, it seems, may there even be any green option in the plan. And that's just plain dumb, given that they went to all the trouble to set this up.

Thank you, my eyes have been opened, I'm going to go pursue that now.

EDIT:

Well, I looked, and I have to come back and tell you the punchline. It appears to be ludicrously easy to make the switch. Unless I'm missing something, I can transfer my payment to green producer, via the Pepco website, just like any other internet shopping. I will pay a modest premium (50%? -- I need to look further) for buying it from a consortium of mid-Atlantic wind farms.

I mean, there's literally a "shopping cart", click click click, give them my name and address, and it'll show up on my bill. I can't a) believe it's this easy and B) believe that I've been perseverating over my electricity use, and for a few $100 a year, I can (at least in principle), simply make my carbon output from electricty go away. And put the money into the pocket of a green producer. And (again in principle) displace that from the VAPower coal-fired output. Unbelievable.

I can't believe it's that easy. It's too easy. I'm going to research a bit more before pulling the trigger.

Further thoughts: so, if it really is a 50% premium or so, and this gets advertised a bit, then we'd find out whether any large number of Americans are willing to vote with their dollars for GHG reductions. Upon study, yes, I believe it'll boost my total payment per KWH from 10 cents to 14 cents. As a proportion of the cost of the electric it's higher but as a portion of total including line charge it works out to be 40%.

That has the earmarks of being about right, to me. At least it was not unexpected. And I see that several major corps in DC have signed up to use it, and some Fed agencies including the EPA. Which to me suggests but does not prove that it works as advertised.

If this really does what I believe it does -- that it directs the portion of my electricity payment that is for the electric (as opposed to the delivery charge) to wind farms, and that in some way I have never understood actually substitutes their ouput for VaPower output, then I'm going to be talking this up to all my friends. This would make a nice Christmas gift for the envronmentally concerned -- buy off their CO2 from their electrical consumption for a year.

Again, thanks. I never ceased to be amazed about the things that I don't know that I don't know.

EDIT: OK, this is my last edit on this. I went ahead and ordered my green power over the internet. My order number was -- 600. Hah. Guess they haven't had a lot of business. This really doesn't jibe with the VaPower website, which made it look like you needed a court order and a shotgun to change your provider. But I know VaPower was fought the whole concept. But PEPCO mentioned no problems, and just said "order here". So I did. I'll pay a 4 cent premium over the standard VaPower rate. Round numbers, it'll cost me a dollar a day to have carbon-free electricity. Kind of puts the climate change thing in perspective, doesn't it. Hell, I spend more than that on beer, itself a well-known generator of methane. For a buck a day I get, in principle, wind powered electricity.

This has really made my day.

For those of you in the DC/MD/VA area, the website to sign up is here:
http://www.powerchoice.com/ProductsAndServ...ode=Residential

Just click the tabs , and have your electric bill handy.

If I get any blowback from Va Power I'll post it, but by every outward appearance I've just signed up for wind-generated electricity. I think I'll go turn on some lights and leave the fridge door open for a while.

And thanks again. And I'm sorry this option isn't available to you. If I think of any other alternatives I'll post more.

 

Nice stuff, chogan. The dollar a day bit really does put it in perspective, doesn't it? Here in CO excel offers us the windsource program. We've been a part of the program since moving here in 2000. We used to get 400 kWh/mo but they've cut us back to about 100 kWh/mo because the program is so popular. Demand outstrips supply from what I can tell. Our new Guv wants to expand our RPS. Renewable energy was one of his major campaign planks. Hopefully that'll translate into more green energy options here in CO.

 

<div class='quotetop'>QUOTE(tripp @ Jan 13 2007, 04:13 PM) [snapback]375235[/snapback]</div>

Two things to say.

First, I'm still looking at the renewable energy certificate issue. A lot of people seem to take this very seriously. I don't see it, myself, but I may have to take back what I said. There must be more there than I am seeing, but somehow I just don't "get it". And $20 per 1000 KWH is 2c/KWH which is close to the premium I will pay. But I made sure that what I'm buying is literally being purchased by PEPCO. But I may have to take back what I said above. I still don't see that purchasing the certificate results in additional carbon avoided, but I do see that 2 cents per KWH is a significant financial incentive to do something.

So, my apology SSimon, if I've overlooked something. I hate being wrong about things, particularly in public. Let me ponder this over the weekend and I'll retract what I said if I'm wrong. All I know now is that a lof of people take this seriously, and that the dollars involved are nontrivial. But I just can't quite get it, somehow.

Second, ain't that great that they've run out of wind power in Colorado? As if people really would vote with their dollars to solve this probem if given half a chance.

 

<div class='quotetop'>QUOTE(SSimon @ Jan 13 2007, 12:06 PM) [snapback]375159[/snapback]</div>

SSimon, I have done you a disservice. Your orginal concept was right. My blather was wrong. Plausible but wrong. Or as least, what you said was more nearly right than what I said.

I feel particularly badly because you did me a good turn in getting me to find my local green energy company. Enough mea culpa.

I don't have it quite straight yet, but I'm getting there.

First, let me just get the magnitudes right, working in tons of C02. A 2 cent per KWH premium, or $20 for a 1000 KWH green tag, works out to be roughly $31 per ton of C02 avoided, at national fossil-fuel-fired electric C02 production rate. The 300 gallons of gas, for 15000 miles a year in a Prius, would work out to be about $100 worth of carbon dioxide, if it had to be avoided at that 2 cent per KWH rate.

Second, two cents per KWH is a significant subsidy. That would indeed draw people in to generate green energy. It would stimulate supply. It would be a substantial fraction of total electric generation revenue.

Third, numerous government entities have mandates to purchase greener energy. So, there is a market ofr green energy.

Fourth, because this is a global issue, you don't have to care where the electricity was created. So, it's plausible that if you cause someone to substitute green for fossil-fuel electric somewhere on earth, then .. you've avoided C02 generation. So, if a US east coast utility pays an Arizona generator the enough to have that generator feed photovoltaic electricity into the Arizona grid, and that reduces use of coal-fired plants in Arizona, then the east coast utility can in fact be said to have purchased a net carbon reduction.

So far so good. That's the point at which I start to lose it.

If we pool all those renewable energy certificates in a national market, and (for whatever reason, say due to a legal mandated to purchase green electricity) people bid on those, and we have a market price set for 1000 KWH of renewable energy certificate, then to what extent can we say that a person (or firm) who purchases a certificate out of the pool is responsible for having avoided the C02 release?

Well, as long as the cost of producing green electric is above the cost of "generic" fossil-fuel electric, and the revenue from those green tags is required to keep the green producer in business, then, in as much as you can make a statement like this about any sort of pooled enterprise of that nature, I guess you can say that the purchaser was (as party to all the purchases of those tags in that market) responsible for the C02 that was avoided.

Here's where I start to lose it. Does NY Power get green tags for the Niagara Falls generating plant? If not, why not? Hydro plants are eligible, Niagara Falls clearly displaces a LOT of what would otherwise be fossil-fuel-fired electricity. So, DOES NY Power get certificates for Niagara Falls, and if so, are they sold like any other.

If that's true -- if Niagara Falls qualifies to generate Green Tags -- then I say all bets are off as to what, exactly, the purchase of a green tag (in a generic market) does. They didn't need that money to be in business, and the additional revenue did not cause any additional carbon reduction. And by analogy, all the green producers that would have been in business anyway, withoug the green tag revenue -- money to them is not generating new C02 reductions.

So, let me leave it at that. I was wrong on the magnitude -- the figures that get kicked around are a fairly large amount of money. If the certificate money is required to keep a produder in business -- then I guess you can fairly claim your pro-rata share of that producers' carbon reduction for your green tag purchase. But ... I can clearly think of cases where the green tag money is not in fact inducing more carbon reduction. I'll read more.

But again, my apology -- it is not anywhere near as simple or as trivial as I made it out to be.

 

I suppose it really depends on what's done with the money. Are the green tags used to fund projects with grants? For example, municipal landfill methane to power projects or wind farm development. My alma mater got a grant from MN to install a 1.65 MW wind turbine and attach it to the grid. The turbine can supply up to 40% of the campus' power needs. Since it just feeds the grid it's an example of offsetting CO2 production.

If the funds are used to help out projects like those mentioned, to lower the risk to the investors then you're achieving the aim. Are there any regulations in VA that limit how the funds can be used? It seems that there must be, otherwise you're just begging for fraud.

 

<div class='quotetop'>QUOTE(tripp @ Jan 13 2007, 05:27 PM) [snapback]375257[/snapback]</div>

No, that's part of what has me fuddled on this. The green tag revenues are just that -- they are the revenues from the sale of those green tags (renewable energy certificates). You have to certify that the green tag is genuine (so there's a fraud angle there), but if you sell it, it's just more income for the business. It's just money, like any other income to the business. They could use it to buy nicer office furniture if they want to. Or use it to build more wind turbines if they wanted to.

So I get back to my main point -- if those green tag monies were required to keep the green energy producer in business, or if the promise of those monies is what got them into it in the first place, that's one thing. Or better, if the green tag revenues let them expand, then that's buying you addition carbon reduction capacity. It's still clearly not a quantified, accounted-for, one-to-one relationship between the tons stated on the tag you bought, and the actual behavioral impact on total C02 release. But yeah, your pamnet for the tag has an impact on total carbon released.

But if the entire installed hydroelectric base of the US is eligible to generate and sell green tags, then the money does nothing. You're just paying them to do what the already do.

Yet, I seem to see a lot of what appear to be fairly serious people taking those tags at absolute face value, as in, I wanted my new office building to be green, it uses X megawatt-hours a year, I bought X MWH worth of green tags, therefore my office building's electricity is carbon neutral. Even though I actually buy the power from a coal-fired utillity. And even though they say that, I can think of easy examples where that just isn't true.

Example: Niagara falls sells its green tags to Illinois power for 1c/KWH. Both keep on doing what they've been doing. Illinois power now claims to be greener, because it bought the green tags from Niagara Falls. I theory, I guess Niagara Falls should claim to be dirtier, but unless NY was under some binding green fuel mandate, in fact, nothing will happen to Niagara Falls. Price of electricy rises 1c in IL, falls 1c in NY. (in a perfect world). But there's no change in carbon release, just a change in IL Power's PR.

I can see the theory of it -- If you have just so much to spend cleaning up the grid, why not pay 1c/KWH extra to have photovoltaic power in AZ displace coal in AZ, rather than pay 4c/KWH to have wind dispace coal in the Mid-Atlantic.? Your subsidy money (your green tag money, if you will) would buy you 4x as much displacement of C02. Got it. But I also see this question: how do you know you didn't just by a green tag from Niagara Falls, which was going to be producing hydro power whether you did this or not, so your money just bought you nothing? Maybe the whole mess works via individual one-on-one buyer-seller negotiations? I can't believe it could work that way.

 

I owe a final, concise followup on the issue of Terrapass and green tags. This is intended to be it.

Exective summary:

Revenues from voluntary green tag purchases provide additional funds to green energy producers. The extent to which they actually increase the amount of green energy produced, and reduce the amount of C02 released, is all-but-impossible to quantify. With certainty, the carbon tonnage on the tag bears no necessary relationship to the actual net reduction in C02 release caused by purchasing the tag, either from direct purchase or through indirect purchase (as through Terrapass). My judgement is that the actual net carbon avoidance is likely to be much smaller than the amount stated on the tag, but that is merely a judgement.

Green tags were not developed to be an incentive mechanism for producing additional green energy. They were developed as an accounting system, to show who "owned" the environmental benefits that resulted from production of green energy. They came about in response to state "green energy porfolio" mandates, which requires elecrical producers to demonstrate the ownership of a certain number of green kilowatthours. States do not care (and do not specify) whether those green KWH come from new capacity or existing capacity, or whether or not those green KWH would have been produced in the absence of the green tag revenues. The states -- the main driver behind the market -- merely mandate that their ultilities ultimately own a given number of green KWH, in proportion to total electrical consumption in the state. Green tags are the accounting mechanism used to demonstrate that ownership.

As such, it should be no surprise that it is not possible to quantify the ultimate impact of green tags on total green energy production. They were not set up to measure that relationship. They were set up simply to determine who owned the rights to the "greeness" of each green KWH. We can probably say that more money to green producers means more green production. But beyond that general statement, there is (and was never intended to be) any necessary relationship between additional green tag purchases and additional C02 release avoided. It is a mistake (or more charitably, a clever marketing ploy) to count the C02 tons on green tags as carbon release avoided by the act of purchasing the green tag. The purchase of a Terrapass may offset some of the carbon produced by a vehicle, through the process of generally encouraging more green production, but in no sense does it make operation of the vehicle carbon-neutral, based on the exact C02 tonnage specified on the underlying green tags.

In sum, after careful study, I return to my initial conclusion. Voluntary purchase of green tags should most appropriately be considered in the same category as a charitable contribution. It is probably associated with a modest reduction in carbon release, but sellers who merely tote up the carbon from the green tags are almost certainly grossly overstating the net impact of the tag purchase on total CO2 release.

The body of the analaysis follows:


This analysis assumes that the reader understands that a "renewable energy certificate" or "green tag" is an audited statement showing that an electric generator produced a known quantity (typically 1000 KWH) of clean electricity, along with a statement of the pollutants avoided in doing so. Once signed up with an audit agency such as Green-e, and having paid the annual audit fee ($4K and up), the green electricity generator then produces green tags as it produces the elecricity that it sells. Then, separately, it sells the green tags.

In a nutshell, a green tag is an audited statement that a green electricity producer produced and sold a given amount of clean electricity, along with an estimate of the environmental benefits from that (e.g., tons of C02 avoided).

Some simplifications:

First, I'm not going to address the issues of potential for fraud or misstatement in those green tags. For example, if you add wind power to a grid that is already rich in hydro (e.g., the Pacific Northwest), and it displaces, in part, what would have been hydro electric, then the carbon-avoided value on the green tag ought to be lower, per KWH, than for a similar wind farm feeding into an otherwise all-coal grid. Whether or not the green tags are accurate is a side issue that I'm dismissing from the outset. Let's assume they are.

Second, let me treat Terrapass as if it were solely a retailer of green tags from green electrical generation. It does more than that, but it does enough purchase of electricity green tags that this is a sufficient way to discuss Terrapass. So, a discussion of Terrapass amounts to a discussion of green tags.

The key question is this: when you buy a green tag, can you accurately say that you have actually reduced US carbon emissions? The second question is, by how much? By the amount stated on the tag? By some other amount? Or is it not possible to tell?

The basic economic argument behind the green tag system is compelling, as long as you believe that sale of green tags causes the underlying green electricity to be produced. It is the classic "why grow bananas in North Dakota" argument. Why grow bananas in North Dakota, at great expense, when you could buy bananas produced in climates that are far better suited to growing bananas. Instead, let those who can produce them efficiently do so, and just buy the output.

So, the economic argument is as follows. If you assume that buying a green tag results in the production of that amount of clean electricity, then (within the limits of the grid's being able to use it all), situate your green electricity production where it is most efficient. And buy it from the people who are the most efficient producers of it, in the sense of avoiding the most tons of C02 per dollar of green tag. Assuming the green tags accurately reflect the amount of C02 release avoided, then I don't really care where the release would have been. I'll buy my carbon avoidance (my green tag) wherever it is cheapest.

In the context of electricity production, you further have to understand that the problems you are trying to avoid are (largely) global in scale. (There are local effects like acid rain, but for simplicity let me ignore them). So, to some approximation, you don't care where the C02 is not produced, as long as it is not produced. It's all going into the same atmosphere.

In the context of the wind farm example above, if all wind farms were equally efficient at producing electricity, then I'd want to locate them in all-coal grids. That would avoid the most carbon per dollar spent on wind electric. In theory , that's what the green-tag system lets you do. If you happen to live on a clean grid, but for whatever reason want to buy carbon avoidance, the wind generator on the dirty grid ought to be able to sell it to you more cheaply than your local wind producer.

Similarly, as has been mentioned in the context of German energy policy, it's not very efficient to install PV arrays at high latitudes. In the US, the equivalent would be to say that it's not very efficient to install PV arrays in Maine, as a way of carbon avoidance. Install them in Arizona, let the Mainer's buy the green tags off them if they want to avoid carbon. It would end up being a lot cheaper per ton of carbon avoided. (Up to the limit of the grid's ability to handle the electricity, and assuming that buying the green tag causes the carbon to be avoided, and so on.)

All of this sounds good, and is predicated on the assumption that buying a green tag causes that amount of green electricity to be produced. That's where this gets into trouble.

There are two articles of faith required in order to believe this works as described above.

Article 1: If I cause clean electricty to be substituted for fossil-fuel electricity, then I have avoided carbon release, even if I don't myself consume that clean electricity. I believe in this one, and it's the article of faith that allowed me to sign up for the green electric option (see DC/MD/VA thread). Note that it is an article of faith. If you have a PV array, you literally consume the clean electricity that you produce. No faith required -- you can trace the wiring. If, by contrast, you purchase the "green" option from your local power provider, you literally consume whatever the local grid average is, and it is a matter of belief in the contractual arrangments that you may consider yourself a consumer of clean electricty.

To put this bluntly: having contracted to purchase wind-generated electricty, I believe my electricity is, to a reasonable approximation, as clean as darelldd's PV electricity. Clearly, that's a matter of logic or faith, and not something that I can prove by tracing the wiring. (Also, I can quibble about technical matters related to the production of electricity, but leave that aside.) But because my utility is literally buying the power from the green producer, it literally displaces that much fossil-fuel-fired power on the local grid, I feel comfortable that the net effect is as if I now consume carbon-free (or nearly carbon-free) electricity. (For a 50% premium over generic, or a bit over a dollar a day extra expense.)

Article 2: The act of purchasing a green tag causes 1000 KWH of green electricty to be produced. This is where my faith begins to falter, and where the story become extremely complex. That's what the rest of the discussion is about.

The role of state mandates on electric utilities.

The key point for understanding what green tags do and don't do is that the demand side of the market for green tags is largely driven by state mandates. That's what this source says, and it makes sense to me.
http://wiki.greenmarketdata.com/index.php?title=Green_Tags

Here's why that's a key point, and where the confusion arises. The green tag represents the "ownership" of the environmental benefits from the clean energy. The state mandates simply say that the local utility has to own so-and-so many green KWH. Probably (almost certainly) this calculation already includes the local utility's captive generating capacity (hence, no green tags are issued for Niagara Falls -- that is already counted in the state green mandate.)

The point is that the state mandates doesn't require these producers to create new green energy, they only require local utilities to own a mandated number of clean KWH (either generated internally, or purchased as green tags). So the states that impose these mandates don't care whether a green tag generates a new KWH of green electricity or not. They only care that the local utility owns a big enough chunk of clean KWH. Period. And green tags, being an accounting mechanism, are perfectly adequate to fulfill that mandate. The states literaly don't care whether the purchase of the green tag was from existing or new capacity, or whether the purchase did or did not cause additional green electricity to be produced. All they want is an accouting system to prove that the local utility's portfolio of KWH complies with a mandate that a certain fraction of them be green.

At any rate, I think this explains why a) the big hydro plants don't issue green tags, and b) why the green tag has developed as an accounting device to determine ownership of the environmental benefits of a clean KWH of electricity. The main market -- the state mandates -- is structured entirely in terms of owning an adequate number of clean KWHs as a fraction of total state electricity use.

In short, green tags serve perfectly as a way to fulfull state requirements regarding the ultimate ownership of the environmental benefits of clean energy production. But that's all they are guaranteed to do. By itself, this does not determine whether buying a green tag results in additional C02 avoidance, and if so, how much C02 avoidance.

To address that broader question, you might first want to read this good discussion from the producer's side, discussing both the "state mandate" market and the "voluntary purchase" market (such as Terrapass). This also gives the truly dismal numbers on the fraction of the population opting for green electricity where it is available:
http://www.cleanenergystates.org/CaseStudi...TagsandProj.pdf

The fact of the matter is that there is no clean yes or no answer to Article 2 above.

In fact, green tag sellers are busily trying to differentiate their product for that vountary market. In other words, for the state mandate market, environmental benefits are a generic commodity and sell accordingly. But for the voluntary market, it is a boutique market, and producers are moving toward the marketing of their green tags (as opposed to generic carbon offsets) based on their particularly appealing attributes of their setup.

To get to the Article 2 question -- does purchase of a green tag cause carbon avoidance, and if so, how much, there are several considerations.

First, it is clear that some producers rely on/expect the green tag revenue as part of their total profit-loss projections. And, more to the point, it is clear that at least some financial planning for new alternative energy includes green tag revenues in the projections. So, if voluntary green tag puchase revenue play a significant role in that, then yes, voluntary green tag purchases cause additional carbon avoidance. Not the tag you bought -- that's from an existing producer -- but because new producers enter in expectation of those tag revenues.

But how much carbon avoidance that engenders is impossible to say. It is even possible that, by getting startups in, it actually engenders carbon avoidance that is larger than what the green tag says. But the clear point here is that if this is the mechanism by which green tags generate carbon reduction -- by improving profitability and encouraging entry -- then the carbon on the green tag is in no way a quantitative measure of the carbon being avoided by the green tag purchase. It might be less or more than the amount stated on the tag. And you could never quantify it.

Second, do producers currently sell all of their green tags? That's an important consideration to an economist. If they don't , then they always have an inventory of tags on hand to sell. In other words, they have zero incentive to produce more KWH of green energy just to get the tag revenues.

I think it's pretty clear that most green providers DO NOT sell all of their green tags. It's tough to say, but I see phrases like "as many green tags as possible". And because of that, I think that most producers do not sell all their green tags, and that the green tag revenue for the typical producer is small, as a fraction of investment cost or revenues. Here, for example, is a USDA site on rural power cooperatives, where the green tag revenues appear quite small relative to the cost of installing the PV arrays:

http://www.rurdev.usda.gov/rbs/pub/sep04/backyard.htm

So, barring better data, I believe that most green tag offerers do not run out of green tags to sell. Particularly those whose purchasers are largely voluntary purchasers. THis means that the typical green producer can sell more green tags without increasing total output.

My conclusion is that, despite the many hazy and incorrect descriptions of green tags to be found on the internet, the correct story is that green tags are an accounting system for ownership of the environmental benefits of green KWH. Period. They show that 1000 KWH of green energy was produced somewhere. But they are not a a one-to-one incenitive mechanism. The purchase of a green tag does not mean that an additional 1000 KWH of green energy was produced, and the resulting carbon avoided. Purchase of a green tag means, at best, providing a small general subsidy to green energy producers. To the extent that this fosters a better economic climate for green energy, thatt ultimately will result in some carbon reduction. But in no sense can you interpret the carbon shown on the green tag as the carbon avoided by the act of purchasing the tag.

 

I am no longer going to support Terra Pass. Quantifying levels of carbon offset by my purchase of REC's seems to not only be difficult for me to understand, but also proves difficult for Terra Pass to verify for me. I've had e mail exchanges with them and my question concerning what portion of my dollar directly funds the offset went unanswered as did my question about how REC's are quantified. Instead, they sent me links and these didn't answer my questions either (if I remember correctly, one website said that quantities are not standardized on REC's and that quantities vary).

I read the auditing firm's report on Terra Pass and even here, answers to my questions concerning quantities offset are lacking.

My searching led me to a company called Native Energy that implements a similar type program. I stopped my research when I discovered that they were a privately held native american company. Federal regulations seem to be lacking on REC's and I'm even more weary as I don't know how tribal law plays into this.

It seems that demanding and purchasing REC's are the way to go to nudge the renewable industry, so I will continue to search for a viable option to offset my carbon and will post if anything seems to have validity. This from Wikipedia. The last sentence is what I'm hoping my purchase serves to do.

"A popular incentive for buying green tags is to make the claim that your energy use is "carbon neutral" and hence does not contribute to global warming. Looking at the situation from a macroscopic level, buying green tags finances the increased costs of green energy producers, to make them just as financially viable a source of energy as polluting energy always was. However, it could be argued that the green energy production facilities which are already built today might still continue functioning and producing energy at the same rate even if no one were to buy another green tag. On a microscopic level, buying a few green tags has very little direct effect on the amount of CO2 produced at this very moment. As larger and larger numbers of green tags come into demand, however, renewable energy will become more and more cost effective per kWh in comparison to nonrenewable energy."

Thanks, Chogan. I appreciate your time and effort. It'll feel good to invest in something where I know that my dollars are serving the actual intent that I have when making my purchase. Maybe I can consider some of my carbon offset since you now found your way to a renewable electric supply to your home. You can serve as my REC.