Buy your way to carbon neutrality?

The Oscar-winning film "An Inconvenient Truth" touted itself as the world's first carbon-neutral documentary.

The producers said that every ounce of carbon emitted during production — from jet travel, electricity for filming and gasoline for cars and trucks — was counterbalanced by reducing emissions somewhere else. It only made sense that a film about the perils of global warming wouldn't contribute to the problem.

Co-producer Lesley Chilcott used an online calculator to estimate that shooting the film used 41.4 tons of carbon dioxide and paid a middleman, a company called Native Energy, $12 a ton, or $496.80, to broker a deal to cut greenhouse gases elsewhere. The film's distributors later made a similar payment to neutralize carbon dioxide from the movie's marketing.

It was a ridiculously good deal with one problem: So far, it has not led to any additional emissions reductions.

Beneath the feel-good simplicity of buying your way to carbon neutrality is a growing concern that the idea is more hype than solution.

According to Native Energy, money from "An Inconvenient Truth," along with payments from others trying to neutralize their emissions, went to the developers of a methane collector on a Pennsylvanian farm and three wind turbines in an Alaskan village.

"If you really believe you're carbon-neutral, you're kidding yourself," said Gregg Marland, a fossil-fuel pollution expert at Oak Ridge National Laboratory in Tennessee. "You can't get out of it that easily."

The race to save the planet from global warming has spawned an industry of middlemen selling environmental salvation at bargain prices.

The companies take millions of dollars collected from their customers and funnel them into carbon-cutting projects, such as tree farms in Ecuador, windmills in Minnesota and no-till fields in Iowa.

In return, customers get to claim the reductions, known as voluntary carbon offsets, as their own. For less than $100 a year, even a Hummer can be pollution-free — at least on paper.

Driven by guilt, public relations or genuine concern over global warming, tens of thousands of people have bought offsets to zero out their carbon effect on the planet.

"It made me feel better about driving my car," said Nicky Tenpas, a 29-year-old occupational therapist from Hermosa Beach, Calif., who bought offsets to neutralize emissions from the Jeep she always wanted.

Offset companies stress that they are not a cure-all for the world's greenhouse-gas emissions, which are equivalent to 54 billion tons of carbon dioxide each year.

Tom Boucher, chief executive of Native Energy, said people first should reduce their energy consumption and waste and then buy offsets. "The only way to really get to zero unless you stop driving, stop traveling."

But the industry is clouded by an approach to carbon accounting that makes it easy to claim reductions that didn't occur. Many projects that have received money from offset companies would have reduced emissions by the same amount anyway.

The growing popularity of offsets has prompted the Federal Trade Commission to begin looking into the $55-million-a-year industry.

"Everybody would like to find happy-face, win-win solutions that don't cost anything," said Robert Stavins, an environmental economist at Harvard University. "Unfortunately, they don't exist."

Lagoon an opportunity

In the rolling hills of southwestern Pennsylvania, outside the town of Berlin, Dave Van Gilder's family has been raising cows for four decades. He and his twin sons, Jason and Justin, tend to their 400 Holsteins while his wife, Connie, keeps the books.

The smell of manure has long been the sweet exhaust of a dairy farm running full tilt.

Millions of pounds of cow excrement over the decades were funneled from the barns to a 3.3-million-gallon lagoon, where it decayed, burping invisible clouds of the potent greenhouse-gas methane.

In the days of Van Gilder's father, nobody cared about the greenhouse gases.

But things began to change a few years ago. Van Gilder didn't know it, but his lagoon had become an economic opportunity.

A local congressman urged him to apply for a state alternative-energy grant to build a system that would capture methane from cow manure and burn it to generate electricity.

The project, known as a methane digester, would cost about $750,000 — $631,000 of it coming from the state and the U.S. Department of Agriculture.

Van Gilder had to make up the difference, but he figured he could earn that back — and in several years start making money — by supplying electricity for the farm and selling the excess to the local utility.

A year before construction began, Van Gilder was contacted by Native Energy, which wanted to buy his emissions reduction, along with the reductions of others who had won state energy grants.

Van Gilder had never heard of the company or the idea of selling clean air. He gladly signed a contract to sell Native Energy 29,000 tons in carbon-dioxide reductions -- the company's estimate of how much greenhouse gas the digester will keep out of the atmosphere over the next 20 years.

"There wasn't a lot of negotiation," said Van Gilder, who was happy to accept whatever the company was offering.

Family members said the contract forbid them from disclosing the payment, but based on a contract with another dairy farmer, signed with Native Energy, it was about $70,000, or $2.40 a ton.

Justin Van Gilder said the money had nothing to do with the family's decision to build its methane plant. "It was a free bonus," he said.

"We still don't understand it all," Connie Van Gilder said. "It's hard for us to fathom, to see what it is doing."

Eager for offsets

The situation was similar for the Alaska Village Electric Cooperative, a utility for dozens of remote communities.

In early 2006, account manager Brent Petrie was at an Anchorage environmental conference talking about a windmill project that the cooperative was building in the Yup'ik Eskimo village of Kasigluk, a soggy patch of tundra on the remote Yukon-Kuskokwim Delta in western Alaska.

Rising 100 feet over the landscape, the three 100-kilowatt turbines were intended to reduce the area's dependence on diesel generators, whose fuel must be shipped in on barges. Federal grants were covering $2.8 million of the project's $3.1 million cost.

Petrie barely had finished his presentation when he was cornered by representatives from two brokers — Native Energy and the Bonneville Environmental Foundation — eager to buy the project's offsets.

The cooperative sold 25 years of carbon-dioxide reductions to Native Energy for $36,000 — roughly $4 a ton.

Native Energy had contributed slightly more than 1 percent of the total cost of the project yet claimed 100 percent of its carbon reductions.

"If you look at the costs of these projects, it's a tiny, tiny fraction," cooperative President Meera Kohler said. The payment did "not determine whether those blades turn or not."

At best, Kohler said, the money could cover some maintenance costs.

Despite its relatively small role in the project, Native Energy counts the windmills as a success, demonstrating the power of carbon offsets to encourage clean energy.

"Every kilowatt-hour they produce means one fewer kilowatt-hour is generated by the diesel generators that otherwise provide power for this village," the company's Web site says.

Untapped market

Wind power has long been a fascination for Boucher, Native Energy's co-founder. As an electrical-engineering major in the 1970s at the University of Vermont, he built a 25-foot-high wind turbine in his parents' backyard, carving the blades from a piece of redwood.

He later worked at a Vermont utility and helped develop one of the first wind farms in the northeast. Boucher started his own company in the 1990s to sell alternative energy but soon came upon a simpler and possibly more lucrative product: voluntary carbon offsets.

It was a new twist on an old idea.

About 30 years ago, the U.S. government began fostering emissions markets that allowed industrial polluters to buy offsets for such gases as nitrogen oxides and sulfur oxides. One of their successes has been in reducing acid rain in the Northeast.

The Europeans recently have adopted a similar model to regulate carbon-dioxide emissions, allowing the continent's dirtiest industries to buy and sell rights to spew greenhouse gases.

The key to these regulated markets is a gradually falling cap on total emissions, forcing factories to either reduce their own emissions or buy someone else's reductions at increasing prices.

Boucher and other environmental entrepreneurs, however, believed there was an untapped market for carbon reductions: people and companies who would buy them voluntarily.

"What was coming was a way for folks to take actions against global warming," said Boucher, a bearded 52-year-old who has long believed that alternative energy can be competitive with cheaper power from fossil fuels.

Benefits from film

After Native Energy's name was mentioned in the final credits for "An Inconvenient Truth," visits to the company's Web site jumped 1,100 percent, marketing director Billy Connelly said.

As a private company, it doesn't report its revenue, but Connelly said he expects it will double its sales this year, reaching a total of about 1 million tons of carbon dioxide neutralized since its founding.

"Things have really taken off in the last year or two," Boucher said. The company has about 20 employees.

Native Energy now finds itself facing competition from nearly three dozen other offset companies worldwide. Some are nonprofit, but most of the biggest are in business to make money.

In 2006, offset companies sold greenhouse gas-reductions equivalent to at least 14.8 million tons of carbon dioxide, more than double the previous year, said Katherine Hamilton, carbon project manager for Ecosystem Marketplace, which tracks the industry.

Sales are expected to double again this year.

For all the money spent, nobody can say if the offsets have done much to alleviate global warming.

The problem is whether the voluntary reductions really exist. The buzzword in the industry is "additionality" — the idea that offset purchases actually lead to additional greenhouse-gas reductions.

The concept should be simple: Pay for a project, monitor its actual reductions, then claim your share.

Instead, offset companies often have vague requirements to determine if their potential investments actually would lead to additional reductions.

Native Energy says it looks for projects that need offset revenue to survive — a difficult standard, since the projects are expensive and the offset payments are relatively small. But even if a project can stand on its own, it still can qualify for the money if it is novel or simply "not business as usual," according to the company's Web site.

That definition has allowed Native Energy and other offset companies to claim the carbon reductions from projects in which they have played minor roles. Still, Native Energy's contract requires projects to certify that whatever offset money they receive "is a necessary component of the project's economic viability."

The company has struggled with whether its funding matters. Boucher said the windmills in Alaska were debated for weeks inside Native Energy since the project already had been funded by the government. "This is a case of one of the more difficult determinations," he said.

Native Energy, he said, eventually concluded that its contribution, if used as a reserve fund for emergency repairs, was meaningful. It helps "to make sure these turbines will run as well as they can, and to further the chances that other wind farms will be built," he said.

In the case of the methane digester, Boucher said the reductions were additional since the offset payments helped cover a significant portion of Van Gilder's out-of-pocket expenses.

The best way to ensure additionality, according to Native Energy, is to pay a project for a decade or more of offsets while the developers are still arranging the financing. The downside is that the carbon reductions might not occur for a decade or more.

Concerns raised

Several environmental and clean-energy groups also have raised concerns about verifying projects, monitoring their actual carbon reductions and ensuring that each carbon offset is not sold more than once.

"People are trying to do the right thing," said Peter Knight, a partner with Gore in Generation Investment Management, which invests in environmentally responsible companies. "It's a new field ... and it's going through some growing pains."

Without government regulation and mandatory caps on emissions, all that is left to drive offset sales is guilt and marketing. Offset companies charge what the market will bear.

"How much are you willing to spend to feel good or to impress your neighbors?" asked Marland, of Oak Ridge National Laboratory.

Information in this story published on September 23, 2007 was corrected on October 3, 2007. The Los Angeles Times story that assessed how businesses and individuals try to become "carbon-neutral" said that one broker, or offset company, Native Energy, did not contact the developer of a methane collector project until after it was mostly funded. Native Energy contacted dairy farmer Dave Van Gilder while he was seeking funding from Pennsylvania for his electricity-generating system. The article also said that the farmer had begun construction when Native Energy signed an agreement to buy future greenhouse gas reductions, which were later sold to the producers of "An Inconvenient Truth" and other customers. In fact, Native Energy and Van Gilder also had signed an earlier agreement, after the state grant had been awarded but more than a year before construction began.