5 Questions to Ask Before Buying Carbon Offsets

Carbon emissions offsets can be a touchy subject. Some people think offsets are just a price businesses can pay to keep generating emissions. But the truth is, there are many industries where the technology needed to decarbonize doesn’t even exist yet.

So if you're a business leader who wants to offset the emissions from your operations, how exactly do you go about doing that? Or if you are an individual who wants to buy offsets for the emissions you create in your daily life, would you know how to do it?  And perhaps most importantly, with accusations of greenwashing flying around everywhere, how does one offset emissions in a transparent and responsible way?

Blake Lawrence from Cool Effect joins  today's show to answer those questions and more. The team at Cool Effect works to use science expertise and transparency to give people the confidence to purchase carbon offsets that will deliver positive results for the world around us. 

For those of you who are new to carbon markets, Blake and I are going to walk through a list of 5 questions every person should ask before buying carbon offsets. You’ll even learn how much it would cost you to offset your OWN emissions … or give offsets to others as a gift!

More resources

Cool Effect Model
Seller's Pledge
Offsetting Travel
Business Offset Calculator

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Transcript

(Note: This transcript was created using artificial intelligence. It has not been edited verbatim.)

Sean McMahon 0:10

Hello, everyone, and welcome to the Modern Money SmartPod. I'm your host Sean McMahon, and today We're gonna dive into the details about carbon emissions offsets. 

Now I know carbon offsets can be a touchy subject. Some people think offsets are just a price businesses can pay to keep generating emissions. But the truth is, there are many industries where the technology needed to decarbonize doesn’t even exist yet. 

If you're a business leader who wants to offset the emissions from your operations, how exactly - do you go about doing that? Heck,we could even ask that at the individual level. If you or I want to buy offsets for the emissions you create in your daily life, how would we do it? ….  And perhaps most importantly, with accusations of greenwashing flying around everywhere, how does one offset emissions in a transparent and responsible way? 

Blake Lawrence from Cool Effect joins me for today's show to answer those questions and more. The team at Cool Effect works to use science expertise and transparency to give people the confidence to purchase carbon offsets that will deliver positive results for the world around us. 

For those of you who are new to carbon markets, Blake and I are going to walk through a list of 5 questions every person should ask before buying carbon offsets. You’ll even learn how much it would cost you to offset your OWN emissions … or give offsets to others as a gift. I learned a lot from this conversation, and I think you will too. 

But before Blake and I get started, here's a quick word from the exclusive sponsor of today's episode. EDF renewables

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Sean McMahon  02:05

Hello, everyone, and thank you for joining me for today's episode. My guest is Blake Lawrence from Cool Effect. Blake, how're you doing today? 

Blake Lawrence  02:11

I'm doing great. Sean, how are you? Happy Friday?

Sean McMahon  02:15

Yeah, ready to wrap up the weekend here for sure. So the reason I brought you on is we want to talk a little bit about the carbon offset market. Your team recently reached out to me with five questions that buyers should ask before they purchase carbon offsets. But before we get into that, tell me more about what you and the team of Cool Effect do. What's the startup story for your organization?

Blake Lawrence  02:33

Well, Cool Effects started with the idea of bringing transparency and the highest quality carbon offset projects to consumers to offset their footprint. The name Cool Effect actually comes from the butterfly effect where one small action can have a large change. One small action and individual offsetting their footprint can have a planet size change when done multiple times. So you, me and the millions of other people around the world who are concerned about climate change, offsetting their footprint, can have a real tangible impact on fighting carbon pollution and climate change.

Sean McMahon  03:13

Okay, now we got a lot of listeners for this podcast that, you know might be kind of new to carbon offsets, they might work for an organization and it's thinking about purchasing some or, or just kind of really, you know, very, very beginners at all this, if you will. So like I said, your firm put out a nice primary for five questions. So let's just dive right into that. So the first question that your team says that group should ask before buying carbon offsets is, is it verified by one of the leading international carbon credit standards to ensure that the offsets are both 100% additional and permanent? Why is that important question?

Blake Lawrence  03:45

It's important because the project must be listed on one of the major international carbon credit standards such as gold standard Vera, climate action reserve American carbon registry, the project also must be 100% additional, meaning that the emissions reductions or removals from a mitigation activity would not have taken place without the added incentive slash funding created by the sale of carbon credits. So that means the project is dependent on the sale of carbon to fund the project's activities. So it's not a secondary source of revenue for the project that the project wouldn't exist. The permanence is also a really important one because climate change is an ongoing thing. We can't just have something be qualify for a carbon on a tree not being cut down for one year to be cut down the next year. The trees have to be protected for a long period of time, because over that time period, they're going to be continuing Lee sequestering more and more carbon. So you need to have a long lasting permanence with each project and these organizations, these verification organizations, their methodologies, The underlying methodologies that qualify for a carbon credit project, help ensure the additionality claims and the permanence claims for all their projects.

Sean McMahon  05:11

So on the topic of permanence, how would these credits account for things like wildfires? You know, in California, you might have a forest of 1000s of acres that is part of an offset. And then it goes up in flames because of a wildfire. Like, what is the industry doing to account for that and insure for that?

Blake Lawrence  05:28

Yeah, so there's this thing called a buffer pool, which is a portion of credits that are set aside at the very beginning to account for things that might unexpectedly happen. So in Brazil, we've been they've been dealing with a lot of illegal deforestation when a group of people come in to your land with guns, what are you going to be able to do. And so a buffer pool is set aside, it's a portion of the total credits that are issued to the project that are set aside at the very beginning to account for any loss of those credits. So in a wildfire, for example, and in really broad strokes, if there is a major wildfire, projects have been known to be canceled, where they're no longer qualified to issue credits in the future moving forward. So there is accountability on that from both the project and the verification organization.

Sean McMahon  06:27

So what happens to the organization that may be bought an offset that then gets cancelled, because there was no disaster?

Blake Lawrence  06:35

The interesting thing about carbon credits is they're not future offsets. They're reductions that happened in the past. And so they're offsets. What they're doing is they're accounting for this tons of co2 that were removed from the atmosphere in previous years before the wildfires.

Sean McMahon  06:54

Okay, and then moving on to the next question here, you know, that organization should ask before buying carbon offsets, does the offset have a stable management team that, you know, the really goes out and gets buy in from the local communities? I can imagine a lot of ways that's important. But why don't you tell me how so?

Blake Lawrence  07:08

This honestly might be one of the more important things in today's world, we really need to make sure that the community level is buying into the project. Because if I go in and I say, Hey, I'm claiming all of this, and the local community is like, No, we're dependent on this for economic resources or their land, then you're not going to have a successful project, you need a project where the local communities are receiving some of these co benefits. And this is something I think it's I believe, that's the next question. But you need areas in the project that expand beyond just reducing carbon, I had the chance to go and visit our project in Myanmar back in 2018. And not only is the community the project, reinforcing a mangrove swamp area, but they've also provided a fishery to be able to catch and sell fish that they catch from the from the mangrove swamp, they have a clam farm. So the women in the local community actually can go in, harvest their clams, and then sell them at the local market on the weekends. So there's jobs that have been created beyond just reducing carbon. And that's all because the project went in with a goal of working together with the community to make it a better project. And it was amazing when I got the chance to sit down with these community members and sit with them and interact with them. And the way the project had influenced their lives. Before they were just cutting down all the trees, but now they're getting paid to go out and plant the trees. And they're getting they're getting resource from that and they don't want to cut it down. But it's there's needs that happen in these third world countries, the global south as you as people commonly refer to it as.

Sean McMahon  09:07

Okay, now, you mentioned co benefits. And you're right, that is the next question on your list. buyer should be asking, Does the project have co benefits? So first, walk our listeners through what are co benefits and why is that also important?

Blake Lawrence  09:20

So co benefits are really anything beyond just reducing carbon. So cookstove projects that removes smoke from the house, there's respiratory benefits to that. There's decreased cook times because they're more efficient, which allow more time for the women and children go outside, get an education. These are all examples of CO benefits. So it's really anything that is extending beyond just reducing carbon and having a positive impact on the local community at the community level.

Sean McMahon  09:49

So you're even saying like, the ability to reduce cook times is important.

Blake Lawrence  09:54

It's amazing. I mean, there we have a project in Honduras that the cookstove decrease Like, I think something crazy like 20%. And because of that the women and children don't have to be inside all day. They can go outside, they can go get an education, they don't have to be trapped by the stove cooking 24 hours a day, seven days a week, 365 days a year. I mean, it's it's amazing the impact that a simple thing that we take for granted in our homes as such as a cookstove that revolutionizes individuals lives in some of these countries.

Sean McMahon  10:30

So what was that project? Was it actually the deployment of cookstoves? Or what was it that it's building?

Blake Lawrence  10:34

It's our breath of fresh air project, they have built 275,000 stoves, as of I think, September, in rural Honduras, and Guatemala, and now Nicaragua, and 275,000 serves, think about a family of four, that's over a million people that that project has benefited by improving the fire, so it burns hotter, so you use less wood, which is less deforestation, which is less cost to the families who have to go out and buy the wood. There's the cook times there's the getting the smoke out of the house, the benefits of a simple cookstove of a fuel efficient cookstove are amazing. And that's just one type of project, forestry projects where the community is now protecting the land. And they use the revenue from carbon to implement tools such as firebreaks, and the land or building water troughs to move clean water from one village to the next. Schools that have been created through the benefit of the sale of carbon. I mean, so many external benefits come from carbon projects on the ground. And that's really the important thing is these it's the good on the ground, Cool Effect calls it the good on the ground. We really like focusing on that.

Sean McMahon  11:57

Okay, and I think that's incredible, because I think most folks, when they first kind of learn about carbon offsets, they're still thinking of forest and things like that. 

We'll be right back.

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Sean McMahon  12:53

And now back to my conversation with Blake Lorenz from Cool Effect. What are some of the other kinds of unique carbon offsets that that might not be front of mind for most people?

Blake Lawrence  13:03

So there's, there's some things that if you'd come across this in the world, I would be very shocked. But it's called a biogas Digester. Again, harking on harking on cookstove. But biogas digesters, they are underground, don't domes, they're built underground, they're buried, and it captures animal waste. So animal waste is flushed from the pen into these into these domes. And using water. So it cleans the pens, then the methane from the animal wastes is captured, and it's used to power the lights in the home and the clean cookstove. And then on top of that, they use the mix of the water and the animal waste as a natural fertilizer, and then they fertilize their crops, making them more healthy and grow better and faster and stronger. It's such a simple tool, it has so many benefits.

Sean McMahon  13:58

Wow. That's amazing. So now moving on. The fourth question on this list of questions that organizations should ask before buying carbon offsets is are its finances and goals able to be maintained for the long duration? 

Blake Lawrence  14:10

So this is a really important question. And it's something that Cool Effect takes into account when we're reviewing a project is we'll actually look through the organization's finances to make sure that the money is being used correctly to expand the project. We know people don't want to pay for a bonus or something like that. The money's being used on the ground influence and get into the community's pockets really. That's the whole goal. So Cool Effect evaluates a project based on its ability to maintain financial stability for the long run. A commitment to long term quality and crediting are essential for Cool Effect as the company's goals is to see long term sustained benefits to both the environment and the communities in which these projects are based. Meaning we want to see the impact But the money has on the ground. And if the money is going to admin costs, that's not the impact that we want. So we transparency is the name of the game here. And we want to make sure that we're completely, completely transparent. And that means following up with the projects, to understand how the money has been used.

Sean McMahon  15:20

What's a typical percentage of of admin costs?

Blake Lawrence  15:22

It ranges depending on the type of project, if you think a, where costs lie with a project, so a forest project, a lot of the goal is to just maintain the project as is you don't want it to be logged, you don't want it to be cut down and you want it to be protected. So the admin costs are going to be lower, versus a cookstove project, which has to pay for parts and construction fees and crews and things like that, that has that has costs associated with it. But a lot of our projects are very transparent about how much money is going to building the cookstove, and how much it cook stove really costs. So you can break out that impact.

Sean McMahon  16:03

All right. And speaking of transparency, the last question here, the fifth question to ask before buying carbon offsets, is all about transparency are the offsets, transparent in all aspects of its project. So this is a big one, right? Because a lot of in the world of investing in the world of ESG, and things like that transparency has kind of really been a key area of focus. So So why is this important and the work that Cool Effect does related to carbon assets.

Blake Lawrence  16:27

I mean, like I said, transparency is the name of the game. And we feel we sleep better at night when we're not when we know what's going on. And so Cool Effects started with the idea of bringing transparency to a market. And really being upfront with everything. Cool Effect is a registered 501 C three nonprofit, we have a 9.87% fee, we are transparent, you can see exactly what our breakout is, from admin to payment processing, we are transparent about that whole side of it. So it's incredibly important to us in an effort to uphold integrity and build trust with our buyers. Cool Effect we we vet our projects financials to ensure that it's clear how all the funds are being used, as I mentioned before, and then years ago, we actually introduced this thing called the seller's pledge. And the sellers pledge is a legal binding document that Cool Effect created that you can download on our website right now. That is signed. And if you sign it, we commit to pricing transparency that is made to any buyer of carbon offsets from our platform. As part of our carbon done correctly program. We hold ourselves to a highest financial and operational standards, no mysterious costs hidden charges. Over like I said, we have a 9.87% fee, that means 90% of your donation is going directly to our project partners. The price you see on the website is the price already with our fee and tact. So let's say you see a price of 1090. It means 90 cents is fee $10 is going to is what Cool Effect paid for our carbon offsets. So the buyer knows how much Cool Effect paid for our for the credits and how much we're selling them for. And there's a transparency between both the project and Cool Effect and Cool Effect on our buyers.

Sean McMahon  18:25

Well, we'll be sure to include a link to your website in the show notes. So listeners can check out that pledge. What are some of the questions you get from organizations when they first reached out to you?

Blake Lawrence  18:35

How do I do this? No, no, we get the main question we get is what is our carbon footprint? How do we figure out our carbon footprint? That's probably the first thing. And it's okay. And a lot of people are like, we want to do this, but we don't really know how to start. And so what we say the best way is you have to start by figuring out your carbon footprint. And we have some organizations that Cool Effect works with. And we also have our business calculator and events calculator that you can find on our platform that will help calculate a rough footprint for your business. So you know what your emissions footprint is. Because once you know what your footprint is, then the fun part begins. You get to pick what project you can support. So do you like trees? Do you like cookstoves? Do you like animals? Do you like the oceans do take your pick. And that's the easy part. The hard part is really figuring out your emissions footprint.

Sean McMahon  19:38

Okay, now have you seen you know an increase in interest in these since things like the inflation Reduction Act were passed and other market trends?

Blake Lawrence  19:45

So we have seen an increase in carbon offset inquiries this past year with businesses because a lot of businesses are looking to make pledges to reach net zero emission goals and a lot One of the a lot of these companies should be working on decarbonisation, and they are. But sometimes the technology doesn't exist yet. And so they need to find a way to offset their emissions that they can't reduce through other means meaning air travel, electricity, usage, foodways, all of these things contribute to their carbon footprint. And so how are they supposed to reduce that? Well, the best way to do it is through carbon offsets and through a high quality Carbon Project. And that's where Cool Effect really fits in into that space is, we're providing that high quality. As Cool Effect. We promised when we put a project on our website that we've done the research to make sure that the money is being used correctly in the right way to have a large impact on the ground. We also see interest spike during different events such as cop 27, where ESG is top of mind for a lot of businesses, and a lot of individuals this time of year. Also during the holiday season, when families are traveling home, they're looking to offset their flights. And then end of the year donations, people want to find a gift for family and friends. And what's a better gift than offsetting a year of your carbon emissions for an individual. The average footprint is 16.6 tonnes per annum for an average American. And that's a great gift.

Sean McMahon  21:24

How much does that cost? 

Blake Lawrence  21:27

Right now on our website is $14.62 a tonne, which is our average price. And you can find projects more expensive, less expensive, but 16.6 tonnes is $242.69.

Sean McMahon  21:41

So if I'm you know, shopping for that person who I just can't think of a good gift,

Blake Lawrence  21:45

can they have a gift? Annual offset is a great gift. And you kind of feel good, I do it for a lot of my friends. It's an easy gift. I know it's going to the right place.

Sean McMahon  21:58

I gotcha. All right. Well, one of the things I'd like to do on the show is to ask guests for their bold predictions. So what kind of bold predictions do you have about the future the carbon offset market over say, the next five years

Blake Lawrence  22:10

if I had my dream? So this is an interesting question, because there's my dream of what might be and where I am and what might actually happen. So my dream is that Cool Effect has pushed the market into a more transparent market, where there's increased transparency between companies and offsetting offsetting groups and projects being more transparent. And so we are still struggling, we come across some projects that we have to kind of pull the string on to kind of get them to be transparent with us. And we end up passing on those projects. We also have projects that are fully transparent with us, which tell us everything. And those are the guys that we like, and those are the guys that we work with. I would also say that the market is going to continue to grow. We saw a quadrupling in the market in 2021, quadrupling $2 billion, the pricing, since September of last year, the average cost on our platform was $9.70. It's now $14.62 sets. So pricing has increased. Now, I don't know if the pricing will increase more. I think we're hitting kind of a cap where some organizations are they got to work within budgets. So what is that limit? And so we have to find, we have to make sure that the market keeps growing, but it's growing at the right rate, and the money's being used correctly as not just inflated admin fees. That's where the pricing coming from. So that's where I'm hoping it will go that we're going to see more, more transparency, and more of this carbon done correctly. Where I think it will go is we have a lot of organizations actually I won't say where I think it's gonna go as well as we have a lot of organizations that are created now to to have that positive impact on the projects to to push the methodologies of the underlying verification organizations to be better. One example of this is the integrity Council for the voluntary carbon market. They are working on improving the methodologies to make sure that there's no more loopholes. There's no methodologies that are being taken advantage of and really driving the market forward, making it better. So making sure that the projects on the ground are working with the community level, there's no more taking advantage of different indigenous groups, things like that. So there's these organizations that are really trying to push forward and make the market a better place. And because it really is having tangible impact on the ground. carbon offsets get attacked a lot because it's just offsetting to pollute. But a lot of these companies who are investing in really high quality Carbon projects, that money is going on the ground, we have a project that 70% of the sale of carbon goes directly to the farmers on the ground. That project is being sold for about $48 a tonne. The Central Africa 70% of that is going right into the community's hands in the farmers hands. That's more money than they have seen in their lives. And it's all because of carbon financing. It can do incredible things. And it's all about the good on the ground.

Sean McMahon  25:33

Okay, well, hey, listen, Blake, I really appreciate your insights. And you know, everything you've said today is excellent information for our listeners. So appreciate your time.

Blake Lawrence  25:42

Thank you so much, Shawn. It was it was a pleasure.

Sean McMahon  25:46

Well, that's our show for today. But before we get out here, I want to say one final thank you to the exclusive sponsor of today's episode, EDF Renewables. 

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