Why does the price of a ton of CO2 fluctuate between €3 and €1,000?
THE TRIALS AND TRIBULATIONS OF THE CO2 OFFSET MARKET. REDUCING COSTS TIME AND EFFORT, BUT SAVES OUR CLIMATE.
Climate neutrality and CO2 offsetting currently go hand-in-hand. The supposedly simple solution to the climate crisis is just too tempting. However, many of us are sceptical and keep thinking that this cannot be everything. And indeed, hardly any provider of CO2 certificates would agree that offsetting alone is THE solution – rather it is simply a first step towards voluntary environmental protection. By calculating their “CO2 footprint”, companies as well as private individuals can make their emissions tangible, track them and take action for the first time. However, the prices of the compensation measures seem almost arbitrary or at least confusing.
Some projects show a price of just 3€ per t CO2, others 25€ or even 1000€ per t CO2. Why? CO2 certificates are issued for certified, validated and regularly verified projects that are permitted by the Kyoto Protocol’s emissions trading requirements. These projects are located in “developing” countries. They will allow local actors to operate their environmental protection measures in an economically secure manner. Examples are solar, wind, hydropower or biogas plants as well as solar ovens or agricultural innovations. All these projects require different levels of support, so overhead and administrative costs can vary. So does impact and risks of these measures.
The selection and decision for an offsetting project is therefore often not clear-cut. Therefore, it is most important that the provider is serious and transparent! Personal preference for a measure should also be considered.
REAL CO2 DAMAGE COSTS
However, the real “damage costs” of one t CO2 have to be taken into account. Apart from the price of CO2 certificates of existing projects on the market, the cost of damage of one t CO2 is quite measurable and far from the current market prices. The Federal Environment Agency calculates a value of at least 180€ per ton, others assume prices of up to 260€.
So, if a typical service company in Germany generates 4t of CO2 emissions per employee, this amounts to 40t of CO2 for 10 employees. These can be compensated on the market with 400€ (average: 10€ per t CO2). A good step to support a trustworthy project. However, the real damages of the generated CO2 emissions are up to 10.400€ (260€ p. t CO2).
So how can these CO2 damages not be passed on to the next generation as pure debt? Reducing is THE answer! Every company can (relatively) quickly reduce CO2 emissions by taking targeted climate measures. For example along the areas of energy, mobility and building management.
So, if you want to reduce your debt burden today, there is no way around emission reduction. 400€ versus 10,400€ is a staggering difference that cannot be easily remedied even by offsets. The company in question could therefore spend 400€ on CO2 compensation, but would then still have up to 10,000€ in “CO2 debt”. It could therefore consider in which reduction measures it would like to invest this sum in order to save costs in the long term. This enables a company to work sustainable, to optimize profits and to make the climate suitable for grandchildren.
Want to drive climate transformation in your organization and understand where your organization stands on climate performance and how it can implement decarbonization measures? Learn more about how our free CLIMATE Readiness Check here will can help your organization take the first steps towards climate transformation quickly and easily!
Image Sources: Artur Lysyuk, Kelly Sikkema and Aviv Rachmadian on Unsplash.
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