Carbon Offsetting Programs: Easing Guilt or Self-Inflicted Tax?

The New York Times has interesting article today (“Paying More for Flights Eases Guilt, Not Emissions”, NY Times, Nov 18, 2009) about the fact that carbon-offsetting programs offered by airlines and third parties do not seem to work.

The article tells the story of Responsible Travel, which in 2002 became one of the first travel companies to offer customers the option of buying so-called carbon offsets to counter the planet-warming emissions generated by their airline flights. Last month the firm announced that it discontinues the program.

“The carbon offset has become this magic pill, a kind of get-out-of-jail-free card,” Justin Francis, the managing director of Responsible Travel, one of the world’s largest green travel companies to embrace environmental sustainability, said in an interview. “It’s seductive to the consumer who says, ‘It’s $4 and I’m carbon-neutral, so I can fly all I want.’ ”

To me this is not that surprising.  A few weeks ago I posted about an article regarding Stockholm reporting that congestion tolls were shown to reduce traffic and pollution. As I mentioned then, congestion tolls are taxes that are meant to regulate the usage of roads and make sure that the users (of the roads) internalize their impact on other users. The idea behind carbon-offsetting programs seemed to stem from the same concept. Yet, as the data seems to indicate, people used these payments to “offset” their already planned travels, which means that these programs did not impact emissions and air-travel.

You will have to admit that it is really not that surprising that a self-inflicted tax does not change traveling behavior.  That’s exactly why we need the government (or a social planner) to levy the tax – since we are not capable of internalizing the costs ourselves (being the self-optimizers we are).

Another issue that is raised in the article is that most of these funds were not very successful in offsetting carbon emissions.  In another words, planting a few trees somewhere in the world is not enough to offset emissions.