Friday, December 21, 2012

Finger Lakes Climate Fund

Like many people with concerns about climate change, I am in the process of making changes in my own life to reduce my carbon emissions.  But, also like many such people, I am trying to do so while not creating chaos for my family, and limited both by how far along in the process I've gotten, as well as the available technical options.

Two big areas where I can't immediately eliminate emissions are car travel (where we will likely go electric in the next couple of years, but aren't there yet) and air travel (which won't be feasible to eliminate so quickly).  We'll keep working on these items, but in the meantime it's attractive to look at offsetting the emissions rather than doing nothing about them.

I should stress that I don't think there's much virtue in taking no action at all to reduce one's own emissions and then offsetting everything.  But I do think offsets potentially have value as part of an overall sincere strategy to reduce emissions.  However, a central worry is the quality of the offsets: there are lots of horror stories of tree plantations that cause environmental damage, or forests that are planted and then allowed to die, or factories being built in China to produce greenhouse gases just so they could destroy the resulting product and then claim the offset.  Developing countries in general tend to be corrupt and disorganized and it seems likely that offset schemes based there will run into all manner of problems.  So the whole offset area has gotten something of a bad name.

For that reason, when I heard about the Finger Lakes Climate Fund, which promises to offset emissions with local projects in my own region I was very attracted to the idea.  Because the projects are local, and I understand my area, I felt it was likely that I'd be able to assess the quality of the offsets.  The main concern is what is called additionality: are the projects things that genuinely wouldn't have happened if you hadn't ponied up your cash?

In addition, since the fund is run by a small local non-profit, I thought it was likely that I'd be able to get reasonable quality information about how everything is run, and satisfy myself that it was legitimate.  That proved to be correct: the Executive Director, Gay Nicholson, sat down with me for an hour this week and walked me through their process.  This is what I learned.

Firstly, the Climate Fund is a project of Sustainable Tompkins,a tiny non-profit that's been around for a decade or so in its current form and is supported by a mixture of foundation and membership money.  They engage in a variety of community sustainability efforts.  So creating the climate fund didn't involve lots of additional overhead: they basically needed to do the planning work of figuring out how they wanted to do offsets and then set up a website - the whole project cost in the very low five figures.

The ongoing process involves working with the local energy efficiency contractors to identify "stuck" energy retrofit projects that are unable to proceed due to lack of sufficient funds and then making a grant that will "unstick" them.  Essentially, whenever they assemble a large enough balance of funds, the Climate Fund reaches out to all the local energy efficiency contractors and canvasses them for suitable projects.  So far (they've only done a handful of projects to date) they tend to get about one submission of a suitable project which can then be helped by the offset grant.

It's worth saying a little bit about the process here in New York that the climate fund is piggybacking off.  I have some familiarity with it from doing a project on my own house.  Basically NYSERDA (the New York State Energy Research and Development Authority) has arranged a variety of funding sources for energy improvement projects on our housing stock.  You
  • work with an approved contractor, 
  • they perform an energy audit on your house, 
  • they propose a variety of energy improvements (the "workscope") 
  • they computer model how much energy the project will save and how long it will take to payback financially.
  • you apply for financing, which involves a credit check
  • the contractor submits the planned project details
  • if everything checks out, you receive low-interest financing for the project and the contractor does the work.
In our case, we used the new on-bill recovery scheme in which the loan payments for the energy upgrades are taken out of our utility bill.  The project plan is required to demonstrate that there is a financial payback within fifteen years and that the utility bills will go down at least a little after the inclusion of the loan payments (since the financial value of the energy savings should exceed the cost of the work).  Being a suspicious soul, I made my own spreadsheet to cross-check the contractor's work.

If you think about this process, you'll immediately realize that the cost of carbon offsets based on efficiency projects should be negative!  That's because there are lots of carbon emission saving projects that can be done that also save money at the same time.  In other words, most of the barrier to near-term emissions reductions is friction and inefficiency, not that reducing emissions actually costs money.

However, it turns out that there are some ways in which this process can break down.  One is a homeowner whose credit or income isn't good enough to get a loan.  (But not people so low in income as to receive federal assistance to have work performed).  Another potential way to get stuck is a project which requires one part that can't be financed due to various technicalities and has to be paid in cash.  And it's these kinds of problems that the Climate Fund is identifying and solving by giving grants based on the offset fund.

At the moment, the process is fairly informal.  The Climate Fund is relying on the integrity of the energy efficiency contractors that this project is really stuck and that there are genuine reasons why it can't go forward.  They are also relying on the integrity of the contractors as to the carbon emissions savings.  My general sense is that this is all fine at the current scale: I know a number of the local contractors and I believe they are sincere individuals who genuinely care about reducing environmental impact and are honest and ethical business people.  Ithaca is a small town and this is one of the advantages of a local climate fund.

To scale in larger cities, I think a climate fund would need to add a good deal more process and cross-checking in order to avoid being scammed.  That, in turn would increase the administrative costs of the offsets.  At the moment, they are paying out $20/ton of CO2 for the energy efficiency projects (where they claim the entire benefit of the emissions reductions of the project against their contribution, on the theory that the project genuinely wasn't going to happen till they came along).  They also have a $2000 limit on the maximum grant size as they feel they are better suited to managing a number of small projects for lower income people, rather than dealing in a small number of larger projects (something I'm inclined to agree with: I'd assume that people with big projects have big houses, and then I'd be wondering about why they couldn't pay for it themselves).

At any rate, I think local carbon offsets are a fine idea and the Finger Lakes fund is on the up-and-up and should be supported.  I think it's also an interesting idea that other cities may want to take a look at. It's very early stage and probably a lot more exploration needs to happen of what other kinds of projects might be funded and how best to manage the process, but it seems like fertile terrain to explore.


James said...


They ought to look for projects that destroy methane.
We need to quit talking about co2 so much.

This project will increase my local utility's wholesale power cost 1%0--but decrease its carbon footprint by 10%, providing as much climate protection as $400M of solar photovoltaics for a capital cost of $6M.

Saving natural gas in houses through efficiency--while laudable and necessary--isn't the best bang for the buck.

I'd encourage Finger Lakes to be more creative. Methane is co2 on steroids.

Unknown said...

Thank you Stu for your post about our Finger Lakes Climate Fund. We appreciate your support and interest in the multiple goals we are seeking with our Fund. James may be correct that methane flaring projects are cheaper ways to reduce climate forcing. But Sustainable Tompkins has always taken a systems approach to the complex cultural, economic, and environmental transitions underway.

We try to increase the saliency of carbon offsets to the general public by emphasizing that they are helping other people in their own community. By helping others, donors are also creating additional benefits to the community by increasing demand for local green collar jobs and stabilizing family budgets by reducing monthly utility bills of those receiving Fund grants. This can spinoff additional benefits to the community if these families therefore need fewer government services to stay in their homes.

These additional benefits are very important and tied to our overall work to help our community transition to a resilient local economy, healthy environment, and strong social fabric. We are a triple bottom line organization and look to build social, natural, and financial capital in our area.

Thanks again for your suport, Stu!