Carbon Offsetting: Conscience Money

The amount we pay to offset our carbon footprint can vary wildly. Ian Taylor finds out why

Concern about the environment is growing in tandem with air travel. With two million more flights scheduled this month than a year ago, payments to offset carbon-dioxide (CO2) emissions in Britain are expected to rise tenfold this year. But there is concern about what the Financial Times calls "carbon-offsetting cowboys".

Mike Hare, managing director of retailer Fleet Street Travel, told a travel companies' conference last week: "We need to stop the exploitation of our clients." He drew attention to a disparity in charges, ranging from £9 to £47.97, to offset a sample return flight between London and New York.

Offsetting works, in theory, by allowing us to cancel the CO2 emissions that are produced by flying - or any other activity - through paying for a reduction in emissions elsewhere. The reductions are quantified as carbon credits and are traded on various markets.

Variations in price for offsetting flights are partly due to inconsistencies in calculating the emissions per passenger. For example, on a London to New York flight, figures range from 1.2 to 3.48 tonnes. A precise calculation is impossible since it depends on the age and type of aircraft, number of seats, distance flown, altitude, passenger numbers, cargo, atmospheric pressure, wind speed and any delays in the air. Carbon-offset providers also tend to differ in how they assess these factors.

But air travel's impact is not limited to producing CO2. Its contribution to warming at altitude is estimated at two to four times the impact at ground level. Some providers take account of this, while others do not.

Climate Care, a carbon-offset trust, applies a model developed by Oxford University's Environmental Change Institute, adopting the lower estimate of impact at altitude. Unlike some providers, it divides the emissions by the total number of aircraft seats, rather than an average number of passengers, so people don't pay to offset empty seats.

Stella Bell, Climate Care's travel-business development manager, adds: "We take account of freight on long flights, but not on short, [so] passengers do not pay the cost of emissions due to freight." Again, this is not universal practice.

The company caps annual payments to investors at 10 per cent of profits and the remainder goes back into the company. It passed on 60 per cent of its revenue to carbon-reduction projects last year - about average in the UK - but expects the proportion to increase as it expands.

Other countries are already setting higher targets. The Swiss government insists 90 per cent of offset charges be passed on, so a Swiss-based, not-for-profit provider such as MyClimate must charge more to cover its costs.

Ms Bell acknowledges: "In Britain, the percentage depends on the company and it is not always clear - some companies are not transparent. It would be a lot simpler if everyone could see the figures."

The type of projects funded and associated offset costs also vary hugely, from large industrial schemes to small community projects. The price of monitoring differs, too.

"A rigorous system of checks requires a lot of administration, so the costs are higher," says Ms Bell. But charges also vary for another reason, she says. "The [offset] price is linked to the market price of carbon rather than the cost of an offset project, and that price changes according to the market."

However, the market price falls far short of the true environmental cost of flying. A report by the government environmental department, Defra, estimates the social and economic cost of CO2 emissions at £257 per tonne. The market price of CO2 was recently as low as £6.25.

Defra is drawing up a code of best practice for carbon-offset providers that should be ready by the autumn. Meanwhile, the travel agents' and tour operators' association, Abta, will unveil its own scheme. Member companies will choose whether to include offsetting in the price of holidays or leave it up to the individual.

"We want to give people a real idea of where the money goes," says Keith Richards, Abta's head of consumer affairs.

For many, it can't come soon enough.