« Ricardo Haussman is bullish on biofuels | Main | China fact of the day »
Markets in Everything: Cheat Offsetting
Building on the thriving carbon offset industry, an innovative British firm, Cheat Neutral, now offers cheat offsetting:
At Cheatneutral, we believe that we should all try to reduce the amount we cheat on our partners, but we also realise that fidelity isn't always possible.
That's why we help you neutralise your cheating. Your actions are offset by a global network of fidelity, developed by us. By paying Cheatneutral, you're funding monogamy-boosting offset projects - we simply invest the money you give us in monogamous, faithful or just plain single people, to encourage them to stay that way.
Many people have already successfully used Cheat Neutral:
David cheated on his partner of ten years, Sebastian, with a younger man. He described for us what happened:
"Seb was so angry with me, I felt really bad about what I'd done. I came to Cheatneutral to offset the side effects of my cheating, and later on, Seb said the only reason he could forgive me was because I'd offset my cheating with Cheatneutral. Thanks to Cheatneutral, we're still together, I can feel good about my cheating, and I've helped to reduce global cheating as well! If I do cheat on Seb again, I'll definitely be calling Cheatneutral."
Hat tip to David Zetland's new blog Sex, Drugs & Water Utilities.
Posted by Alex Tabarrok on November 8, 2007 at 07:08 AM in Current Affairs | Permalink
Comments
orgasm offsets?
Posted by: shawn at Nov 8, 2007 7:53:49 AM
You need to check out the info page on this one... It's been around for some time, got a lot of media coverage but is a campaign tool by the awesome people at the Centre for Alternative Technology to raise awareness about the ridiculously immoral practice of carbon offsetting.
They also have a brilliant video http://www.youtube.com/watch?v=f3_CYdYDDpk
Elle
Posted by: Elle Dodd at Nov 8, 2007 7:53:53 AM
Very interesting, thanks! ;-)
Posted by: Chris Meisenzahl at Nov 8, 2007 7:59:15 AM
I guess the economics lessons is that 'additionality' is hard to prove in international fidelity.
Posted by: odograph at Nov 8, 2007 8:05:49 AM
BTW, I find real cognitive dissonance when the 'immorality' of offsets comes from those with a libertarian bent. They are a voluntary exchange. They are, in fact, a form of voluntary economic exchange. And, if additionality can be proven, they might even be buying something of value.
Posted by: odograph at Nov 8, 2007 8:09:43 AM
The reason so many people misunderstand carbon offsets is because of misleading articles like this one. It's disappointing that you would give it prominence.
Carbon offsets are not supposed to be moral indulgences. They simply seek to reduce the total amount of carbon emissions in the most cost effective way. If the goal is to a) reduce carbon emissions and b) do it efficiently, they a market for offsets makes complete sense. Ideally, a carbon tax, set at a price that fully priced all the externalities of carbon emissions, would align economic decisions with those that were globally optimal.
The point is to use the power of markets and economics, rather than moral harangues. It has nothing in common with betraying your spouse. Instead, it's like the difference between say, pricing water at its cost rather than pricing it too low and then scowling at people who take long showers or have a glass of water with their meals.
It's sad when people misunderstand this. What's worse, I suspect some people with an agenda intentionally try to sow confusion about carbon offsets.
It's maddening when an economist blog that should know better perpetuates and amplifies this misunderstanding.
Posted by: A student of economics at Nov 8, 2007 8:30:00 AM
Alex, the post from September that you link to had a comment from Eduardo S that mentioned cheatneutral.com already.
There was also an earlier post from Tyler in February about whether carbon offsets make sense.
Personally, I think the mockery is on target.
Posted by: at Nov 8, 2007 9:45:12 AM
I'm thinking of starting a firm to handle Food Neutrality. If someone consumes more food than they produce, they can pay money to someone who produces more food than they consume, and we would handle coordinating the payments (and transporting the food, perhaps stockpiling it in a central location where people could pick it up when they drop off their payments). Do you think this is workable, or is it too radical?
Posted by: John Fast at Nov 8, 2007 9:47:22 AM
I'm thinking of starting a firm to handle Food Neutrality. If someone consumes more food than they produce, they can pay money to someone who produces more food than they consume, and we would handle coordinating the payments (and transporting the food, perhaps stockpiling it in a central location where people could pick it up when they drop off their payments). Do you think this is workable, or is it too radical?
Posted by: John Fast at Nov 8, 2007 9:48:23 AM
John Fast has it right. If you want to mock carbon offsets, then mock all markets.
In precapitalist days, it might have made sense to shame some people for eating more food than they produce. Today, markets take most food consuming and producing decisions out of the moral sphere and we're all better off as a result. Pollution, of course, can be trickier to measure and manage, but the fundamental concept is the same.
Economists can help smooth a comparable evolution for pollution markets by explaining Pigou's theories rather than resorting to cheap and misleading mockery.
Posted by: A student of economics at Nov 8, 2007 10:10:29 AM
Student should consider that perhaps the teacher knows something. I find that giving the benefit of the doubt to the author makes reading much more enlightening. Case in point, you would think that a libertarian leaning economist would appreciate the benefits of a cap and trade program, right? So why would such an economist post a mockery of carbon offsets? Deduce....Perhaps it's because carbon offset programs are all trade and no cap. The difference is a big one. Do read Tyler's earlier comment, as _ suggested:
http://www.marginalrevolution.com/marginalrevolution/2007/02/do_carbon_offse.html
Posted by: Alex Tabarrok at Nov 8, 2007 10:28:55 AM
Come on Alex, you can only make "all cap and no trade" work if you pretend that there has never been an offset with "additionality."
That kind of willful blindness is not appealing.
Posted by: odograph at Nov 8, 2007 10:36:49 AM
cap <-> trade ;-)
Posted by: odograph at Nov 8, 2007 10:40:19 AM
Teacher is indeed wise, but regrettably, not infallible. I'm sure he's wise enough to listen to and learn from reasoned arguments, even from humble students.
1. Carbon emissions are a global problem. I am equally hurt by a ton of CO2 emitted in Brazil as in Boston. Hence, reducing CO2 emissions anywhere in the world benefit me equally. Let's do it in the cheapest way. On the other hand, if my S.O. is unfaithful, it does me no good at all if someone elsewhere doesn't cheat. Hence, trading in fidelity is meaningless. Confounding the two serves to confuse readers who think CO2 is a purely moral issue, when it can easily be a tradeable product. The potential problems with CO2 markets in no way follow from the silliness of hypothetical fidelity markets
2. I did read Tylers earlier post. We agree that the caps are not stringent enough or suitably monitored and enforced -- in other words, people who sell offsets may not really be delivering what they promise to deliver. The market is nascent and imperfect. But the concept is on target. Let's follow through with the food analogy. In 1906, a consumer who used markets to buy a can of "beef stew" might not really be getting beef stew, as Upton Sinclair pointed out in his novel The Jungle. The solution was not to mock food markets and revert to moral suasion to provide wholesome meals. Instead, the public outcry, led to the passage of the Meat Inspection Act and the Pure Food and Drug Act of 1906, which established the Food and Drug Administration. This took a deeply flawed market for food and made it better. Today it works reasonably well, though it's still imperfect.
3. The corresponding strategy for carbon offsets is obvious. We need to improve the measurement and management of C02 emissions (as I suggested in my earlier post). Instead of mocking and confusing people about the role of this nascent market, teacher might more usefully suggest institutional changes to make it more effective. Let's focus attention where it is needed, instead of diverting people into irrelevancies and non sequitors.
Do we agree?
P.S. Tyler needs to think more carefully about demand and supply when he writes "The quantity of dirty power consumed might well go up rather than down" in response to a decision by one consumer to reduce his consumption of dirty power. This will lower demand, and yes, that can reduce the market price. But no, it won't reduce the price so much that it then ultimately increases demand, at least given any reasonable demand function I can think of. Less demand leads to, well, less demand. At worst, if demand were perfectly elastic ie. there were infinite quantity of people with exactly the same valuation, then the price and demand would be unchanged.
Posted by: A student of economics at Nov 8, 2007 11:10:09 AM
I said carbon offsets are all trade and no cap which is correct. I didn't say there has never been any "additionality." Without a cap, carbon offset firms are dodgy not fraudulent.
I find it ironic that student is being pedantic. Isn't that my job? Nevertheless, I appreciate the vigor.
Posted by: Alex Tabarrok at Nov 8, 2007 11:35:46 AM
Those "iron in the ocean" guys are heading to sea, hoping to demonstrate "additionality" in ocean carbon capture, without negative side effects.
Perhaps you could explain how this is a false "additionality."
Posted by: odograph at Nov 8, 2007 11:49:46 AM
Wait, is this a different argument than I think it is? When you say "dodgy not fraudulent" are you saying offsets are not bad, but merely using the prefect (global caps) to damn the good (active and honest offsets)?
I mean, sure, a rigorous and global system of carbon caps would be swell ... you have a programme for that?
Posted by: odograph at Nov 8, 2007 11:54:34 AM
The easiest way to do carbon offsets is to buy wood furniture and purchase more wood products. Death to the Spotted Owl!
Posted by: 8 at Nov 8, 2007 12:02:04 PM
Only high quality furniture, ;-), something that people will have reason to keep for centuries.
Posted by: odograph at Nov 8, 2007 12:19:40 PM
The problem with personal carbon offsets is that industrial ones are at least intended to "offset" carbon produced by some productive activity. Personal ones are intended to provide a cover for high-living gazillionaires, so they can have their Gulfstream-based, multi-mansion lifestyles and be sanctimonious too as they hector the little people about their pickup truck and trip to Disneyworld.
And besides, AGW is bunk anyway, but that's a topic for another thread...
Posted by: Foobarista at Nov 8, 2007 12:43:03 PM
So offset the pickup and laugh back at them (it's cheaper than the gas to get to Disneyworld, and pales compared to a family admission).
Posted by: odograph at Nov 8, 2007 1:10:39 PM
You know, if the U.S. government would just devote 0.36% of its annual budget to buying carbon offsets, it could be in full compliance with that Kyoto Protocol right now!
Posted by: Ironman at Nov 8, 2007 1:27:01 PM
Why merely go cheat neutral? Have these people no ambition? Why not follow the example of Fiji Water, which is going carbon negative!
So let's go cheat negative. It's doable if we recruit more participants. Say, monogamous animals like penguins and seahorses, or asexual organisms like yeast.
Posted by: at Nov 8, 2007 5:31:26 PM
The problem is that Student's desire for a colder climate conflicts with my preference for a warmer one. Increased northern hemisphere agricultural productivity, warmer winters--why do CO2 restrictionists hate Canada so much?
Posted by: srp at Nov 8, 2007 5:34:07 PM
I love Ironman's observation, which shows how utterly ridiculous the carbon offset market is.
Many carbon offsets fund alternative energy projects. There is no objective measurement, or even order-of-magnitude estimate, of how much an extra dollar invested in alternative energy reduces carbon emissions, and indeed due to fungability the answer may well be zero, or close to it. Other carbon offsets buy EU carbon emission certificates, but since the EU has printed certificates represeting much more carbon than they actually emit, there is also effectively no marginal reduction in carbon emission from buying one. A few carbon offets plant trees, which is at least a temporary real and quantifiable carbon sink, but since trees do not store carbon anywhere near as long as unburnt oil, this is not really equivlent to the burt oil.
As an offset mechanism, then, the carbon offset markets are a fraud, and deserve to be identified as such. As a feel-good mechanism, they are like indulgences, and deserve to be ridiculed as such. Student wants to go easy on this ridiculous fraud and concentrate on ways to improve it. The way to improve it is to abandon it. A real cap-and-trade system would be a wonderful alternative, but even doing nothing would be better than perpetrating a fraud.
Posted by: David Wright at Nov 8, 2007 5:54:56 PM
