23 Feb 2017

Guilty Pleasure: Offsetting Travel Emissions

Martine writes*

For some people, air travel is a source of joy, entertainment, holiday-feelings or business-activities. However, this type of transportation also creates environmental pollution and contributes to climate change through its greenhouse gas (GHG) emissions, which is less joyful. Keeping in mind the recently adopted Paris Agreement [pdf] where the United Nations decided to cut GHG emissions and keep global warming under 2°C, we might need to rethink our traveling behavior.

In an ideal world, people would be able to enjoy air travel while at the same time avoiding consequential environmental damage. Environmentally-conscious travelers will quickly point to the option to compensate for the environmental damage by offsetting their flight’s GHG emissions, of which carbon (CO2) is one. An organization, for example GreenSeat, will reduce the same amount of CO2-emissions elsewhere to get your carbon footprint to zero. A one-way flight from Amsterdam to Australia emits 11.200 tons of CO2 and can be compensated by donating 9.24 euros to renewable energy projects in Uganda, India or Cambodia. It’s cheap and feels like the right thing to do, so shouldn’t we all do this?

Before giving away the answer, I’ll first quickly explain the theory behind offsetting and the UN’s promise to keep global warming under 2°C. Please bear with me, our environment is at stake.

To keep their promise, the UN will need to invest billions of dollars to lower their CO2-emissions with at least 26 GtCO2 per year [pdf]. The price to abate 1 ton of CO2 depends on the country where the investment goes to, its phase of economic and social development and the already existing energy structures. For this reason, the ‘price’ of CO2 differs per country and industry, ranging between US$1.3 and US$524 per ton CO2. Intuitively, it is best to capture the cheapest forms of abatement first, the so-called ‘low-hanging fruits’, followed by other increasingly expensive ways to reduce emissions. In economic terms, this is called ‘diminishing marginal returns’, or ‘increasing marginal costs’. Figure 1 shows the costs of abatement and the reduced GtCO2 per year. You can see that some measures, like building insulation, are more efficient to reduce CO2 emissions than other higher cost abatement measures, like forestation or biodiesel.

Figure 1: Global Cost Curve for Greenhouse Gas Abatement (Enkvist, Nauclér and Rosander, 2007)

Of course, GreenSeat also knows this, and to keep the travel-offsetting price the cheapest possible for their environmentally-conscious consumers, they will invest in abatement at the low end of the curve in figure 1. And this is exactly the problem with flight-offsetting that I want to point out. Even though GreenSeat does reduce CO2-emissions with their investments, they do not contribute to the 26 GtCO2 per year reduction that is needed to keep global warming under 2°C, because their consumers emit the same amount of CO2 to the atmosphere during the flight that they bought the CO2-offset for. My biggest concern with this is that in the meantime, GreenSeat (or any other travel-offset organization/company) takes away the low-hanging fruits, the cheapest forms of abatement, while not solving the climate change problem. As the marginal costs of CO2 reduction increases, it will be even more difficult to invest efficiently to tackle global warming. Offsetting carbon emissions may be cheap and feels like the right thing to do, but environmentally-conscious travelers would do better by not traveling by plane at all.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.


Corneill said...

Interesting blog post! As someone who flies quite regularly to go home and see family, I too have tried to take part in these carbon neutral programs. I do struggle, however, to find an alternative to flying home (from Amsterdam to Kuala Lumpur). Taking the car would be neither pleasant nor efficient, and the University of Oslo has published research showing that with only one passenger in a car, the climate impact is at the level of an average air trip. An additional interesting note is that according to the United States Energy Information Administration, jet fuel produces an average of 21.1 pounds of CO2 per gallon, whereas car fuel produces 19.6 pounds of CO2 per gallon. This is not a very big difference, with the bigger problem being that aviation emissions include black carbon, nitrous oxide and sulphur oxide, which adds even more to the greenhouse effect and the trapping of heat than CO2 (according to the IPCC). Perhaps paying for these carbon neutral programs could provide funds for research in the aviation sector to help fix these problems, rather than just planting a tree somewhere.

Nastasia said...

​The way I see it, you're pointing at several different ways (i.e., Green Seat method, building insulation, forestation, and bio diesel) in which individuals can contribute to the abatement program. Then, you're specifically looking at a particularly targeted group of 'consumers', namely travelers, and look into how they can reduce their carbon foot print. I understand the Green Seat method, although I have my reasons to doubt that each traveler will opt for it, i.e., not all travelers are 'eco-friendly', and even those who might be, may not be aware of such existing alternatives. Economically speaking, I believe that losing oneself into morality may not accomplish the aimed reductions in GHG emissions, and therefore I’d suggest opting for policies that promote full-pricing mechanisms that may be more appealing in terms of providing incentives that can de facto change consumers' behavior. *Food for thought: what if Green Seat makes sure that plane tickets incorporate an extra tax that accrues to them by signing contracts with different airlines? Do you think that would be feasible? What would incentivize airline companies to actually respond accordingly? – Perhaps the government can make sure that those carbon emissions are fully-priced by requiring companies to charge e higher price, and make sure that a part of it is dedicated to such issues.

Next, you point at the fact that even though travelers might conform to the Green Seat alternative, the option per se is less efficient than, say, building insulation – or, that in fact, their footprint is not really offset by Green Seat, because they eventually emit carbon by other means. However, I see this as slightly different from polluting when travelling by air. Of course, you are right, the main issue holds: carbon emissions – the sources, however, are different. What I mean is, probably Green Seat is doing a great job, but it’s the consumers that carry out other carbon-generating activities, which are not related to Green Seat itself – that is, it’s not the company’s responsibility to solve them.

Again, people need incentives to change their behavior, regardless of the nature of the problem – and most of the time, it’s unlikely that people value something unless it’s priced. One way to look at this issue is to consider that since the atmosphere is no longer a public good, but rather belongs to 'the commons', people's rights should consequently become slightly more constraint by their obligations. That is, if each of us is contributing to carbon emissions on a daily basis, and that in turn, leads to environmental degradation, then we are responsible of diminishing our carbon foot print. In terms of building insulation, perhaps regulatory policies can make sure that the prices of non-insulated buildings go up, so that people are incentivized to insulate their homes. Of course, issues of morality revolving around those who are not able to afford that should be further discussed.

You raised an important point when saying that marginal costs of offsetting carbon emissions will rise considerably as time goes by, which is why somewhat ‘aggressive’ policies may need to be implemented, since, seemingly, one cannot rely on a commonly shared level of morality when tackling such fast-paced approaching issues. In this sense, legislation (i.e., regulation) plays a crucial role in the process of reducing GHG emissions.​

Joanna said...

First of all I agree with you and you raised a really interesting topic. My main concern is that the whole process of offsetting ones' carbon consumption through flying might be the wrong way to tackle the issue, especially when the prize is kept low as much as it is in this industry. Approximately 10€ for a flight to Australia is arguably not even close to the real "cost" that is created through the carbon emitted into our atmosphere. For example, my next flight to Newcastle is supposed to be carbon neutral if I pay 1€. This money is then donated by KLM to an organization that does development projects that are supposed to be carbon sinks. However, on average a development organization needs 30% for administration which means that only 0,70€ is invested into these projects which is an absolutely ridiculous amount of money to begin with. I believe that the act of compensating for the carbon that is emitted by a person's consumption behaviors creates a framework where it becomes okay to emit as long as you "invest" into carbon neutralizing measurements but as long as these measurements are as badly management and kept cheap this is creating the wrong incentives. People who might not have flown as much because of the carbon emissions will now fly more if there is the option to do it carbon neutral. Doing the research where the money is invested into takes a lot of time and most people will not do it. Bottom line: as long as the cost for carbon neutralization is not adapted to a realistic amount this creates the wrong incentive therefore adding to the problem of carbon emissions though air travel.
The environmental costs should be included in the ticket price which would change the industry massively.
I know that Lufthansa, for example, takes other measures to lower unnecessary emissions although that is arguably for financial reasons as well. While I was working for the company the 4th seat in the LH Group cancelled the in-flight magazine for the same reason. Maybe something to look into?

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