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Survey Finds Vast Price Disparity In Unregulated Carbon Offset Market

Posted on: Friday, 20 February 2009, 14:20 CST

Despite attempts to increase price transparency in the unregulated carbon offset market, prices paid by air travelers to mitigate their contribution to global climate change vary greatly.

Many airlines and offset developers sell such carbon offsetting credits to business travelers and tourists to allow people to justify their flying by funding a carbon reduction project elsewhere in the world.  And many nations and companies purchase these offsets to help them meet binding international climate goals under a regulated carbon market,

However, while prices on the regulated offset market have plunged some 50 percent in recent weeks as the global recession reduces industrial output and subsequent emissions, prices paid by consumers in the unregulated market have lagged behind those reductions .  

Indeed, a survey of 12 offset providers found prices varying from 9-30 euros per ton of avoided carbon dioxide.   

"If the market for CERs (offsets) is at 10 euros and you are charging around 30 to offset you have to ask what is happening there," International Carbon Reduction and Offset Alliance spokesman Edward Hanrahan told Reuters.

The differences are due in part to the quality of the offset credits, he said.

Carbon offset purchasers pay per ton of their expected CO2 emissions.  The money then funds projects that reduce emissions elsewhere, such as planting trees in developing nations.

Offset developer Tricorona charges around 30 euros a ton, including tax, for "high quality" offsets.

"We are currently reviewing our pricing, in the wake of current market conditions," said business development manager Conor Foley in an interview with Reuters, adding that the firm will unveil new prices on Monday.

"We will not have a mark-up of more than 25 percent. For 2007, it was 15 percent," he said, referring to the profit after subtracting administration costs.

"The rest goes to project activities," he said.

British Airways currently charges around 19 euros per ton to offset a flight from London to Bangkok.  That price is based on market prices in November, the company said on its Web site.

"We don't make any money from this. We buy a set amount of CERs at a fixed price depending on the time of purchase. We use them until they run out and then we buy more," British Airways said.
 

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Source: redOrbit Staff

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