8. Price per ton of carbon offset (this section was last edited for revision 1.3)

8.1 Comparing carbon prices among the offset companies

Chart 5. Price per ton of CO2 offset

Notes:
The CarbonNeutral Company‘s price includes 17.5% UK VAT.

The price to offset one ton of CO2 varies substantially. The prices for the companies in this study range from $5.50 (Carbonfund.org) to $27.40 per ton (myclimate, Swiss site); eight of the thirteen companies have prices within $10 to $15. The price differences do not seem to coincide with the percent of overhead each company charges (see section 6.3, p.19). There also does not seem to be a clear correlation between price and for-profit versus non-profit status. Excluding myclimate (CH)’s very high price, non-profit companies and for-profit companies charge the same average price per ton ($12.35).

Some companies purchase offsets on the international market through institutions such as the Clean Development Mechanism (CDM). CDM offsets are more expensive than VERs. Therefore it is not surprising that two of the three highest priced offsets are sold by companies that purchase carbon offsets through the CDM (atmosfair and myclimate).

Table 7: Companies Sorted by Cost per ton of CO2

Notes Table 7:
All currency conversions made on 7/3/06 using online converter found at: http://www.xe.com/ucc/

1CarbonCounter.org is a project of two non-profit companies.

2 Cost based on calculated average. Actual cost varies by ton of carbon emitted. e.g to offset 1 ton costs $19.95 Canadian Dollars, to offset 40 tons costs $195.95 Canadian Dollars, which is $4.90 Canadian Dollars per ton.

3 It is not obvious on every website if the company refers to short tons or metric tons. The right hand column indicates what we assumed. Because we did not know for sure if metric or short tons are quoted, we did not convert prices.

High-cost carbon offsets might be cost prohibitive for consumers and low priced carbon offsets might be an indication of lower quality offsets. Yet there is not necessarily a correlation between price and offset quality. A very successful company will find lower cost ways to reduce emissions so its price might be low. On the other hand, such low costs may reflect low quality projects just as for any product in the market place. There is no readily available metric to evaluate these issues.

Even though cost will clearly play a part in a consumer’s decision making process, the quality of the offset projects and not cost should be the determining factor. It is more important to invest in high quality offsets than to buy as many offsets as possible.

8.2 Comparing Carbon Prices to the European Trading Scheme (ETS)
The European Trading Scheme (ETS) came into force in 2005 and covers heavy industry and power generation. It is mandatory and includes 12,000 sites across all the 25 European Union member states. Each participating country proposes a National Allocation Plan (NAP) including caps on greenhouse gas emissions for power plants and other high emitting industries. The NAP must subsequently be approved by the European Commission.

Since the start of the European Trading Scheme (ETS) the price per ton of CO2 has fluctuated between $12 and $34 (1). When making these price comparisons, it has to be taken into account that ETS is a cap and trade system whereas voluntary offsets are mostly created by project based transactions. Also, ETA is not yet a mature market (Henrik Hasselknippe, 2006) and the voluntary offset business too is a very new trade. Yet it is interesting to note that the prices per ton of CO2 offsets are more or less in the same range. Comparing the offset companies’ prices with ETS, however, shows that the offset companies tend to charge less for offsets than what their value would be on the ETS market – over half the offset companies charge $12 or less per ton of CO2 offset. This might indicate that carbon prices on the voluntary carbon market are currently undervalued.

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Notes

1 In its first year, 399 million tons of CO2 were traded on the ETS market for a total of $9.2 billion. The price of allowances increased more or less steadily to its peak level in April 2006 of ca. $34 per ton CO2, but came crashing down in May 2006 to under $12/ton when it became clear that many countries had given their industries such generous emission caps that there was no need for them to reduce emissions. Consequently, NGO's have accused national governments of abusing the system under industry pressure, and have urged for far stricter caps in the second phase (2008-2012). (Henrik Hasselknippe, 2006; http://www.emissierechten.nl/marktanalyse.htm)