The Future

Business Carbon Credits?

To cut back on carbon, environmentalists are using the force of the free market. In carbon-emissions trading, the government puts a cap on how much carbon an industry is allowed to emit from power plants, factories and cars. Innovative companies could meet those caps through actual reductions and earn carbon "credits," which they could sell to industry laggards.

In the USA, Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont have agreed on a regional cap-and-trade system. Arizona, California, New Mexico, Oregon and Washington have signed a similar pact. New emissions-reduction technology is sexier, but old-fashioned horse trading might just be more effective.

Paying for your Carbon Sins?

Feeling full of climate-change guilt, Americans are snapping up carbon offsets from Web-based retailers and nonprofits. Unlike mandatory allowances, offsets allow consumers to pay voluntarily to reduce carbon emissions by a quantity equal to their estimated contribution. The money typically funds clean-energy projects, pollution control, tree planting and forest conservation.

But offsets are picking up skeptics along with customers. Critics say consumers have little assurance that the projects they underwrite really reduce emissions and warn that those buying offsets may sometimes pay for improvements that would have happened anyway. They also argue that carbon-offset trading distracts from the urgent need to change U.S. policies to address global warming.

Are these criticisms fair? "There needs to be more standardization, more verification and more assurances for the consumer that the offsets are real," concedes Ricardo Bayon, director of Ecosystem Marketplace. A number of organizations, including the Center for Resource Solutions in San Francisco and the Climate Group, based in Britain, are racing to establish certification standards.

Even supporters of offset trading agree that it's no substitute for comprehensive national policies. "This voluntary stuff is an interim measure," says Judi Greenwald of the Pew Center on Global Climate Change. "But it is certainly better than doing nothing."

The chance to buy a carbon offset—in essence, an emissions indulgence—appeals to the environmental sinner in all of us.

Emission Standards

If cars have to meet energy standards, why don't power plants? Carbon-emission standards limiting the amount of CO₂ that a new power plant can spew are in place in a handful of states in the USA. California's tough new rules virtually exclude new coal plants until clean-coal technology comes on line, and could establish a national standard—just as they might for auto emissions.

A national carbon standard would be aggressively opposed by power companies that depend on coal. But it could also spur investment in renewables, clean coal and even nuclear (that's another fight) more rapidly than carbon taxes or cap-and-trade systems. With 159 new coal-powered plants slated in USA for the next decade and more than that in China in the next year alone, a critical choice is looming.