Carbon offset pricing may confuse tourists

Nina Chestney, Reuters 20 Feb 09;

LONDON (Reuters) - Air travelers are paying vastly differing prices to offset their contribution to climate change, in some cases three times market levels, despite efforts to increase transparency in an unregulated market.

Under a regulated carbon market, countries and companies buy offsets to help them meet binding international climate targets.

Prices have halved in recent weeks as recession reduces industrial output and expected emissions.

But prices which consumers pay in an unofficial market have lagged behind those falls.

Carbon offsetting is offered to tourists and business travelers by many airlines and offset developers so as to allow people to justify flying by funding a carbon reduction project elsewhere.

"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," said International Carbon Reduction and Offset Alliance spokesman Edward Hanrahan.

Prices differed partly due to the quality of the offset credit, he added.

Prices vary from 9-30 euros per ton of avoided carbon dioxide, a survey of 12 providers showed.

Carbon offsets traded on regulated exchanges at 9 euros on Friday, while unregulated prices can be much lower.

Buyers pay per ton of their expected carbon dioxide (CO2) emissions, for example for taking a flight.

The money helps fund projects which reduce emissions elsewhere, such as planting trees or trapping methane emissions from waste dumps in developing countries.

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

"We are currently reviewing our pricing, in the wake of current market conditions," business development manager Conor Foley told Reuters, adding that the company would launch new prices on Monday.

"We will not have a mark-up of more than 25 percent. For 2007, it was 15 percent," he said explaining that the mark-up is defined as the profit after deducting administration costs. "The rest goes to project activities."

British Airways charges around 19 euros per ton to offset a London to Bangkok flight. The company website says that is based on market prices in November.

"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," a company spokeswoman said.

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(Reporting by Nina Chestney; Editing by Peter Blackburn)