Last month, to the delight of many global-warming skeptics, it was revealed that Al Gore uses 20 times as much electricity and natural gas at his Tennessee house than the national average. Out of curiosity, I put the former vice president's power bills and ZIP code through the home-emissions calculator of TerraPass, a company that sells "carbon offsets"—the promise to reduce greenhouse gases by the same amount your behavior increases them.
TerraPass estimated that the power use of a house equivalent to Mr. Gore's causes 377,000 pounds of greenhouse gases annually. That is roughly the annual carbon emission of 20 Hummers. Next time you see Mr. Gore wagging his finger about the energy sins of others, picture a caravan of 20 Hummers driving to the Academy Awards.
A Gore spokeswoman told the press that the former vice president pays extra for wind energy, and buys carbon offsets. He's not the only one: companies that sell such offsets are rising in popularity, and certificates for them were included in the stars' Oscar night goodie bags. Soon not just individuals, but the entire United States, may be purchasing carbon offsets on a grand scale.
TerraPass charges $1,247.50 for one year of carbon offsets for a home like Mr. Gore's, the price including a refrigerator magnet proclaiming the home "carbon balanced." Initially I found it hard to believe anyone could counteract Mr. Gore's prodigious energy lust for just $1,247.50, since planting about 20,000 trees would be required to neutralize even half his house's carbon footprint.
But it turns out that TerraPass does its good works in part by covering landfills to prevent methane from seeping out. Since methane is a far more potent greenhouse gas than carbon dioxide, covering landfills is a cost-effective way to wrestle with global warming. I may be annoyed by Mr. Gore's hectoring, but I'm not going to accuse him of hypocrisy on this one.
This all seems a classic example of economies of scale. Individuals can't do anything about landfill methane. But a company like TerraPass can combine the resources of many to accomplish this task, allowing the person of good intent to use energy with no net contribution to the greenhouse effect. Whether companies marketing offsets really do reduce greenhouse gases is something for consumer reporters or the Federal Trade Commission to determine. Assuming the sellers do as promised, buying carbon offsets isn't an exercise in guilt. It's smart economics.
There is also a bigger issue here. That offsets are smart economics may be central to slowing carbon accumulation in the atmosphere. The scientific case for greenhouse-gas regulation is now strong, and Congress may soon impose the first carbon dioxide limits on American producers. Current bills in the Senate—one sponsored by John McCain and Joe Lieberman, another by John Kerry and Olympia Snowe—would cut domestic greenhouse emissions to about the level of 1990.
On the plus side, these bills would create a significant profit incentive for greenhouse-gas reduction. Offering inventors and entrepreneurs a profit incentive should lead to an outpouring of anti-global-warming innovations.
But even if successful, the McCain-Lieberman or Kerry-Snowe bills would only slightly lower future atmospheric levels of greenhouse gases. That's because Chinese carbon emissions are skyrocketing.
Since 1990, according to the World Resources Institute, American greenhouse emissions rose 18 percent while Chinese emissions rose 77 percent. China may pass America as the No. 1 emitter of greenhouse gases as soon as 2010. If current trends hold, by 2050 emerging nations led by China and India will emit twice as much carbon as the United States and Western Europe combined.
China's emissions are soaring because the Chinese economy is nearly three times as "carbon intensive" as America's, burning far more fossil fuel per unit of gross domestic product. Chinese coal-fired power plants are notoriously inefficient, consuming twice as much coal per kilowatt produced as American generating stations. They also run without the elaborate anti-pollution "stack scrubbers" found in Western power plants. And China opens a new coal-fired generating station every week to 10 days.
Here's where offset economics come into play. Dollar for dollar, capital invested in greenhouse gas reduction would accomplish more if used to improve the efficiency of Chinese power plants than if spent in the United States. America needs legislation capping carbon emissions here, but Congress should allow American companies and consumers to use investments in carbon offsets in China and India against those caps, where the bang for the buck is much higher.
As a bonus, American investment in reducing Chinese and Indian air pollution would improve public health in those nations. Today smog in Chinese and Indian cities is worse than any in the West since London of the early 1950s. The result is far higher rates of respiratory disease in China and India than in the West.
If our goal in legislating against carbon releases is not simply punishing the West and its power companies but truly trying to reduce the accumulation of greenhouse gasses in the atmosphere, the main event will be in the developing world. We must use the smartest possible economics, and that means investing in China and India.