Questions and Answers about Carbon Offsets

Questions about NativeEnergy Travel Offsets

Questions about Renewable Energy Credits and CO₂ offsets

Questions about NativeEnergy

Questions about wind power

Questions about farm methane generators

What does NativeEnergy Travel Offsets do and who does it serve?(back to top)

NativeEnergy Travel Offsets will market the sale of Co2 and Co2 equivalent greenhouse gas offsets to the travel industry, to travel programs or services of businesses or organizations, to travel industry conferences, car rental companies, airlines, cruise lines, hotels and resorts and other related businesses.

How will NativeEnergy Travel Offsets go about its work?
(back to top)

NativeEnergy Travel Offsets will:

Help travel company owners learn how to lessen the carbon impacts of their businesses
Market their clients� results through sustained joint marketing campaigns
Raise the awareness of travelers and develop a strong demand for carbon offsets
Work hand in glove with travel company leaders to reduce the impact of the travel industry

What is NativeEnergy Travel Offsets relationship to
NativeEnergy?(back to top)

NativeEnergy Travel Offsets is a new limited liability company which was formed in October 2006 as a joint venture between the company NativeEnergy and two leading experts in the field of sustainable tourism, Megan Epler Wood and Richard Edwards.

Why was NativeEnergy Travel Offsets formed?(back to top)

The travel industry causes approximately 3.5% of the world's carbon emissions and its impacts are rising rapidly. NativeEnergy saw the need to develop a company that specializes in working with the travel industry.

Who is leading NativeEnergy Travel Offsets and what is their mission?(back to top)

Megan Epler Wood and Richard Edwards are long-time advocates of ecotourism and have committed themselves to working with the industry to reduce and offset its carbon impacts as part of their lifetime commitment to sustainable travel.

What are renewable energy credits? (back to top)

For every kilowatt hour of electricity a renewable generator generates, it also generates a one-kilowatt hour renewable energy credit. The generator can sell both commodities together as "renewable electricity" or sell the electricity as "generic" electricity to one buyer and the RECs to other buyers. Legally, it's all about who owns the RECs

See a picture at the wholesale utility level

See a picture at the retail household/business level

Here's a simple way to think about it. Let's say your utility offered you the opportunity to pay a little more each month for wind power, and you did. From that point on, the electricity feeding your meter would be exactly the same as it was before you started buying wind power. That's because all electricity is the same, and you can't tell particular electrons to go to a particular house on the grid. So what do you get when you buy wind power from your utility? You get electricity from the mix of all sources feeding the grid, and "credit" for having had the electricity you use replaced with wind power. That "credit" is the core of renewable energy credits, or RECs. When you buy wind power from your utility, you're really just buying ordinary electricity and RECs in the same transaction from the same supplier. In fact, your utility may or may not buy wind power on your behalf - they may simply buy wind RECs for you. Either way it's the same. Because all electricity is the same, ownership of RECs and an equal amount of ANY electricity is legally deemed to be ownership of renewable electricity. As an alternative, you can continue buying the electricity you're going to get anyway from your utility, and use that "little more each month" to buy RECs from any of several REC suppliers. NativeEnergy is such a supplier, but with a twist - with NativeEnergy your purchase can help finance construction of a specific new renewable energy project. Learn more.

What are Carbon Offsets? (back to top)

Offset - n. 1. something that counterbalances; a compensating equivalent. Carbon offsets are a valuable, short-term tool to help us transform to a low or no-carbon economy in which carbon offsets are no longer needed. Carbon offsets are a mechanism to accommodate the fact that for now, there are practical limits to how much each of us can reduce our own energy use. To make up for the CO₂ emissions we can't avoid, we can instead help someone or something else reduce other CO₂ emissions. Basically, carbon offsetting involves helping someone to do something that they wouldn't otherwise have done, that results in less CO₂ emissions than would have happened had you not helped them to do it. A carbon offset is what you get when you say "I'll help, but in exchange, I want the right to claim the carbon reductions as my own." NativeEnergy gives you an easy and cost-effective way to reduce emissions from fossil fueled power plants and from common agricultural practices. We enable you to help finance construction of new sources of clean and renewable electricity, and in exchange, we secure for you the right to claim a portion of the resulting carbon reductions. These projects' electricity reduces the amount of electricity generated by fossil fuel-powered generators, and the farm projects reduce onsite emissions - for you. Offsets can be created by renewable energy projects, energy efficiency, and land use and agriculture-based projects, like methane abatement. By buying the offsets, you help them get financed and built, and their emissions reductions compensate for the CO₂ pollution you create by driving, flying, heating your home or using electricity. Offsetting isn't an excuse to pollute, though. It's a way to take responsibility for pollution we can't avoid. Please reduce your energy use as much as you can, and then offset the climate impacts of the energy use you can't yet avoid.

Are some Carbon Offsets better than others? (back to top)

Arguably, a ton of CO₂ reduced is a ton of CO₂ reduced, period. We think there are other considerations, though. The first is whether that ton was going to be reduced anyway, or was the project that reduces the emissions made possible by the opportunity to receive money for its offsets? To generate "real" offsets, the project must be beyond business as usual (see "What is the Importance of Additionality" below.) A second question is what do you want your purchase to accomplish? Many offsets, even though they are generated by projects that are additional to business as usual, are generated by projects that exist today. Purchasing these offsets rewards the project for having gone beyond business as usual, and helps build market demand for offset projects. With our premium "help build" offsets you can help help build new projects directly. Learn more about your choices. Finally, it is important to ask who benefits from your purchase and are there other ancillary benefits? We focus on Native American, family farmer and community projects, helping create sustainable economies for communities in need. Our projects also can reduce nutrient run-off on farms and improve air quality in their regions.

What's the difference between a REC and a Carbon Offset? (back to top)

All RECs from qualifying new generators represent the environmental attributes of renewable power, principally the fact that producing that power causes less, or no, pollution. When you buy an amount of wind-generated RECs equal to your electricity consumption, you are legally entitled to claim that you are wind powered, and that your electricity use does not contribute to global warming. In other words, all wind RECs can convert your electricity to wind power. However, for a REC to be used to offset emissions from driving, flying or heating your home, it must be from a project that would not have been implemented without the opportunity to realize revenues for the carbon reductions (in other words, it must be "additional" to business-as-usual - see "what's the importance of additionality, below"), and not all renewable energy projects can say that.

Why do some RECs and Carbon Offsets cost more or less than others? (back to top)

In some areas of the country, there are legal requirements for utilities to include certain growing amounts of renewable energy in their mix, and supply is constrained, driving REC prices very high. In other areas renewable energy resources are abundant, making the energy less expensive to produce. Our pricing for our premium "help build" RECs is designed to give the projects the difference between the revenues and tax benefits available to them, and what they really need for revenues to get financed and built. Importantly, by purchasing and paying up front for the long-term RECs/offsets, we provide the projects the financial equivalent of a much higher price paid over time - every dollar up front equates to $2 to $3 paid over time, depending on the discount rate and the length of our purchase.

What is the importance of "additionality"? (back to top)

Lots of things reduce carbon emissions, and would regardless of the existence of the market for carbon offsets. Nuclear power plant upgrades, new natural gas plants, money saving efficiency measures and no-till agriculture, all reduce carbon emissions, but those things often are done for reasons other than reducing CO₂ and would be done regardless of the availability of revenues for the carbon reductions.

The job for the voluntary carbon market is to reduce carbon emissions above and beyond what would have happened anyway. That's why a carbon offset has to be generated by a project that meets two tests - it must have been implemented to reduce carbon emissions, and it must be a project that faced one or more barriers to successful implementation or operation that is overcome by the opportunity to receive revenues for the carbon reductions. It's a matter of letting what's going to happen anyway happen anyway, and using the limited resources of the voluntary carbon offset market help build projects whose construction or successful performance is dependent on revenue from carbon offsets.

For our premium "help build" RECs and offsets, we focus on smaller, distributed projects that usually need even more than the "opportunity" to receive revenues for the carbon reductions - an opportunity that carries some risks, like not enough buyers. We focus on the kind projects that need those revenues under contract up-front, on a long-term basis. The more customers we have, the more contracts we can sign that will get more projects to the finish line.

What is NativeEnergy's Additionality Test?
Read a good article on additionality.

Why are renewable energy credits (RECs) sold separately from the power? (back to top)

Renewable energy projects are often located in regions where there are not enough people nearby who are willing to pay the premium price that the project needs - the price that reflects the environmental value of its power. In addition, transmitting its power a longer distance to markets where people are willing to pay that premium adds even more cost (and in fact, it wouldn't even get there - if you transmit power from one grid to another, the power that actually moves is the power that happens to be closest to the "bridge" at the time). Splitting the project's output into two separate commodities - the power itself, and the environmental attributes of that power (the RECs) - enables the project to sell its power locally at market rates as "regular" or "generic" power, and recover its premium cost by selling the RECs to buyers in other markets or regions who are willing to pay the premium to support renewable energy.

This system adds flexibility and efficiency to the renewable energy market. In addition, it simply recognizes that because all electricity is physically identical, it doesn't matter which electricity is credited or claimed as renewable, as long as you only claim as renewable the amount that actually is from a renewable source. Ownership of RECs gives you the right to "call" a certain amount of electricity (that you use) is renewable (however many kilowatt hours of RECs you bought).

Alternatively, if the renewable generator meets additionality criteria, you can claim the CO₂ reductions associated with your RECs as offsetting your non-electric carbon footprint, from flying or driving, for example.

How does renewable energy reduce CO₂ pollution? (back to top)

This is a simple matter of federal law, efficient grid operation and physics. Under federal law, renewable generators can force utilities to buy their power. For efficient grid operation, if the utility has to buy the project's power, it is going to use it. As a matter of physics, if the utility uses the renewable project's power, it must, for any given level of demand, use less from other sources - the electricity grid cannot have more electricity flowing into it than is being used at a time, so when a renewable generator generates power, the grid operators turn down other generators to compensate (or when demand is rising, they turn the others up less than they would have without the renewable power). For efficient grid operation, they turn down (or turn up less) those generators that have the highest fuel costs - fossil fuel plants. The result is that for every kWh generated by a renewable generator, one kWh less is generated by fossil fuel plants. Renewable power directly reduces emissions from burning fossil fuels.

How do you estimate how much CO₂ pollution is reduced? (back to top)

We believe in transparency as the best way for our customers to be confident in the environmental value of our services. Our approach is to estimate conservatively, to disclose our estimating methodologies, and to monitor and disclose how our projects perform relative to the estimates we made. That makes us accountable to the market, and enables us to make better estimates as we learn.

Here are our methodologies:

Long-term REC generation and CO₂ avoidance by:

Grid-connected wind projects

Alaska micro-grid wind projects

Grid-connected farm methane projects

If I'm buying the RECs, who gets the power? (back to top)

The power is sold or used locally. For example, the Alex Little Soldier Wind Turbine Project is selling the power to a local utility. Our Alaska Native Village projects sell the power to their retail customers. Our farm methane projects use some of the power on the farm, and sell the rest to the grid. What's important is that the generator is required to treat the power, whether it sells it or uses it itself, as "generic" power, and to make no claims regarding its environmental attributes that would conflict with our customers' rights to use the RECs to treat their own power as renewable or to offset their CO₂ footprint. When the generator sells the power, we require it to include the same restrictions in its sale contracts, and we check to make sure the restrictions are there and that we can enforce them.

What if my project isn't built? (back to top)

Part of actually helping build new renewable energy projects is committing to them in their early stages of development, when some uncertainties remain. If the conditions for our purchase of your project(s) - RECs and/or offsets are not met, or if your project(s) is not built with NativeEnergy's support for any reason, your purchase price will help build an alternate project within one year following the date by which your target project was to come on line. See our terms and conditions for details.

What if my project breaks down? (back to top)

We conservatively discount each project's expected performance to a level that we are confident that the projects we help build will perform - on average - as well or better than we estimated to our customers. When we first started out in 2000, with only one project we were helping to build, we really had no choice but to ask our customers, in trade for realizing the benefit of more tons than we promised if their project performed normally, to accept the risk of fewer tons if it performed below our discounted estimates. Now that our business has grown, and with it our portfolio of projects, we can use that average overperformance by the total portfolio to make up for the failure of any given project to perform as well as we estimated, which we do. See our terms and conditions for details

Do I still have to buy electricity? (back to top)

Yes. Renewable energy credits (RECs) are something you buy - either from your utility as "clean energy" or from independent REC suppliers - in addition to your electricity, in order to mitigate the environmental impact of the electricity you use.

Are these credits just permissions to pollute? (back to top)

No. Pollution credits, or "allowances," are legal permissions to pollute. For CO₂, they don't exist yet - there are no restrictions yet on CO₂ pollution in the US, although California and the Northeast are moving in that direction. Theoretically, if you bought a pollution allowance you would take away a polluter's ability to emit that amount of pollution, although if too many were bought and the market got too tight, polluters might choose to pay fines and keep polluting, or the government might issue more allowances.

RECs, on the other hand, are a financial instrument that supports and rewards renewable energy generation. For every kilowatt-hour of renewable energy generated, a REC is created. So while we want fewer pollution allowances to be issued, we want as many RECs as possible to be generated. Buying RECs can help stimulate demand for renewable energy and can incentivize increased renewable energy and REC production.

What if my landlord pays for my electricity and heat? (back to top)

That's OK, you can simply offset the average home's power and heat (12 tons), or the average apartment's power and heat (8 tons).

Are we a non-profit? (back to top)

NativeEnergy is partly owned by the non-profit Intertribal Council On Utility Policy, although we are organized and operate as a for-profit company. If we are to solve the climate crisis, we as a society we need to attract as much capital investment in solutions as we possibly can. We need profit as a motive for action. Back when we were first organizing NativeEnergy and developing our novel "help build" approach to renewable energy, we considered carefully whether to organize as a non-profit or a for-profit. In either case, we felt that we would need outside funding to build our business, and ultimately we decided that we would be considerably more likely to attract the necessary funding were we able to offer our funders a return on their investment. We firmly believe that business can be good for the environment, and must be. If doing good remains the exclusive province of non-profits, we have little hope of creating a sustainable economy and a stable climate for our children. The bottom line is that we believe we can keep more CO₂ out of the air as a for-profit company than as a non-profit.

How much goes to the projects? (back to top)

Like NativeEnergy, the projects we support are mostly for-profits. It is simply a fact of life that if wind farms and farm methane projects can't make profits, we won't have many wind farms or farm methane projects - and we need lots and lots of them to solve the climate crisis. Our "help build" business model is really very simple: We make otherwise insufficiently profitable renewable energy projects profitable enough to get financed and built. We do it buying their long-term renewable energy credits (RECs) and/or CO₂ offsets up front, and selling shares of those RECs and offsets up front, thus buying down their initial investment costs and increasing their investment return. So a partial answer to "how much goes to the projects" is "enough to get them financed and built." For the Rosebud Sioux Tribe's Alex Little Soldier Wind Turbine Project, it was about 25% of the cost of the turbine. For the Wray School District's wind turbine project, it was about 14% of the total project cost. Importantly, by purchasing and paying up front for the long-term RECs/offsets, we provide the projects the financial equivalent of a much higher price paid over time " every dollar up front equates to $2 to $3 paid over time, depending on the discount rate and the length of our purchase.

For our "traditional" RECs and carbon offsets, purchased from operating projects, we pay as much as our competitors do, regardless whether they are for-profit or non-profit. It is simply a fact that the market has grown sufficiently that now there is wholesale market "rate" for carbon offsets, and several regional market rates for RECs.

Is this tax deductible? (back to top)

When you offset with NativeEnergy, you are purchasing property (RECs and other CO₂ offsets are property) and you are donating that property to Clean Air-Cool Planet for it to further its charitable purpose of reducing global warming by retiring the credits or offsets. Think of it like you are buying soup from a grocer (NativeEnergy) and donating it to the local food drive (CA-CP) for it to give to hungry people. The general rule under the Internal Revenue Code is that when you donate property to a qualified charitable organization (CA-CP is a qualified 501(c)(3)), you are entitled to deduct the fair market value of that property from your income. Please consult with your tax adviser to determine whether that general rule applies in your particular circumstances.

Are we a Native American company? (back to top)

NativeEnergy is partly owned by the non-profit Intertribal Council On Utility Policy (COUP), an organization of Native American tribes. COUP acquired its interest in NativeEnergy on behalf of its member tribes, primarily to accomplish two principal strategic goals:

To enable its member tribes to benefit from the retail value of their RECs. In the past, COUP has looked to NativeEnergy as a wholesale purchaser of RECs from the tribes' projects. Through NativeEnergy, the COUP tribes have the opportunity to participate in the retail market directly ' while continuing to be a wholesale supplier.

To reduce cost and risk of participating in the retail market. Entering the retail market through NativeEnergy also gives the tribes a head start in the retail market, leveraging NativeEnergy's established national presence and loyal customer base to reduce the tribes' cost and risk of starting new retail businesses. In addition, through NativeEnergy the tribes can now enter the retail market jointly, rather than in competition with each other.

The investment is structured to have COUP itself retain a significant minority interest in NativeEnergy, and to hold the bulk of its equity interest for distribution to its member tribes that sell RECs to NativeEnergy. Each COUP Tribe can earn a portion of COUP's equity interest through the pricing terms of the RECs sales to NativeEnergy. NativeEnergy developed this creative deal structure to accommodate the COUP tribes' currently modest financial resources - no tribe will incur any investment cost unless and until it can do so out of the new revenues it realizes from its successful wind energy development and RECs sales.

Who is Intertribal COUP? (back to top)

Intertribal COUP is a council of Great Plains tribes that provides a forum for utility issues discussion from regulatory and economic perspectives, with a heavy emphasis on wind energy development. The Intertribal COUP Council has representatives from nine Tribes located in a three-state area in the Northern Plains: South Dakota, North Dakota, and Nebraska. The Tribes include the Cheyenne River; Flandreau Santee; Lower Brule; Mandan, Hidatsa, and Arikara; Omaha; Rosebud; Sisseton; Spirit Lake; and the Standing Rock Sioux Tribes. The Cheyenne River Sioux Tribal Telephone Authority is also a member.

The Tribes in the Northern Plains have a huge wind resource, one of the best on the planet. It has the potential to provide clean renewable energy for Tribal use and sustainable economic development, as well as for export to large population centers in the Western and Midwestern regions. Wind energy from Tribal lands alone can meet at least one-third of the nation's energy needs. Wind energy has the greatest potential to restore Native economies. COUP envisions every Tribe in the Northern Plains developing wind energy to power their homes, Tribal and community buildings, and industries and providing clean, inexhaustible energy to the growing regional and national markets.

Intertribal COUP is developing an 80-megawatt (MW) Intertribal Wind Energy Project on six reservations. This project has been selected as an Environmental Justice Community Revitalization Project by a fifteen-member Interagency Working Group, and COUP has received a $1 million appropriation from the U.S. Department of Energy to complete the feasibility and pre-development costs for the 80-MW Intertribal Wind Energy Project. COUP plans to develop 10-MW projects on each reservation to serve local markets and/or WAPA power purchase contracts. The projects will be owned by each Tribe but marketed and managed under an Intertribal business structure.

Who is Clean Air-Cool Planet? (back to top)

Clean Air - Cool Planet is the leading non-profit finding and promoting solutions to global warming working with corporations, communities, and campuses in New England, New York, New Jersey and Pennsylvania. CA-CP creates partnerships in the Northeast to implement solutions to climate change and build constituencies for effective climate policies and actions. www.cleanair-coolplanet.org.

Do I have to donate my RECs/offsets to Clean Air-Cool Planet? (back to top)

RECs are tradable commodities, so if you want to be climate neutral, you need to retire them from the market. Our customers could simply make a commitment to retire them as they're generated, but a better way to make sure it happens is to donate them to a non-profit that commits to do that for you. Think of it like you wanted to make sure that some land was never developed. The best way to do that is to donate it to a land trust. CA-CP is like the land trust for your RECs. CA-CP has agreed with us that it will accept our customers RECs, and that it will not sell or otherwise transfer them, or use them, for any purpose, except to the extent necessary or advisable under applicable law to effect their retirement, such as transfer to a duly constituted government agency for retirement. CA-CP has authorized us to make this representation to you on its behalf. If you purchase RECs from us and donate them to CA-CP through us in reliance on that representation, the representation becomes an enforceable legal obligation.

Why is wind power more expensive? (back to top)

While the wind is free, wind farms cost more per kilowatt hour they produce than most fossil fuel plants because the up-front investment in wind turbines still remains high. In addition, wind farms aren't as heavily subsidized as fossil fuels. That's what makes our "help build" RECs model so important for the projects we help build ' our customers help buy down that up-front cost to a level that the project can get financed and built.

Do wind turbines kill birds? (back to top)

Wind turbines initially got a bad reputation for killing birds because a very few early projects were poorly sited in migratory paths and raptor feeding grounds. The old lattice-type towers were great for nesting, and the smaller, faster turning blades were a real danger. Wind turbines now use a tubular fiberglass tower, and the bigger blades rotate at lower revolutions per minute. Also, it is standard practice now to conduct environmental assessment studies to minimize impacts on wildlife. According to a review of available research, data collected outside California indicate an average of just under two avian fatalities per turbine per year.* By comparison, this review states that utility transmission and distribution lines, the backbone of our electrical power system, are responsible for 130 to 174 million bird deaths a year in the U.S., and cars and trucks kill 60 to 80 million birds per year. Free ranging housecats? The best estimate is 39 million per year - in Wisconsin.** Audubon Society stands up in support of wind energy.

*Avian Collisions with Wind Turbines: A Summary of Existing Studies and Comparisons to Other Sources of Avian Collision Mortality in the United States; National Wind Coordinating Committee; West, Inc.; August, 2001.

** Cats and Wildlife: A Conservation Dilemma, Wisconsin Department of Natural Resources.

Can I put up wind turbines on my land? (back to top)

If you own a significant amount of land, check these wind resource maps to see if it is in a suitably windy area. If so, send us an e-mail business@nativeenergy.com with some background and contact information, and we'll forward it to some of the developers we work with.

Are wind farms a realistic source of electricity? (back to top)

Absolutely. There's enough wind energy potential in the Great Plains to power the entire country, and then some.

How do farm methane projects work? (back to top)

We help build manure digesters on family dairy farms that store their manure in storage ponds, where it is kept before being spread two or three times a year on the fields. In these storage ponds, all but the very surface of the manure has no access to oxygen, so bacteria that thrive without oxygen decompose the manure, giving off gases including methane as a byproduct, which bubble up and enter the atmosphere. There, methane has 21 times the global warming impact of carbon dioxide. Each 95¼ pounds of methane can be expressed as one ton of CO₂-equivalent, or CO₂e. The farms we work with install anaerobic digester systems in place of the storage ponds. These digesters are heated, airtight systems that accelerate the decomposition and capture the methane, which the farms then burn, typically in diesel generators, to produce electricity and useful heat. The digested manure is then pumped from the digester to pre-spread storage lagoons, with virtually no future methane off-gassing. As the CO₂ emissions from burning the methane for electricity and heat are equivalent to the CO₂ that would have been emitted if the manure was put directly onto the fields (i.e., by the cows), the electricity and thermal energy are considered CO₂-neutral. As a result, the farms create three sources of CO₂ or CO₂ equivalent reductions:

Reductions from the displacement of electricity from fossil fuels that results from the farms' generation of electricity and delivery of that electricity to the grid;
Reductions from the displacement of the farms' use of fossil fuels for heating and cooling that results from the farms' capture and use of heat given off by the generators; and
Reductions from the avoidance, or abatement, of fugitive methane emissions that would have resulted from the farms' continued pond storage of manure that would have occurred in the absence of the digester.

What other benefits do they have? (back to top)

Some people find the smell of cow manure to be rather unpleasant, especially when it is concentrated in a storage pond. One of the big advantages of the digesters is that the bacteria destroys the odor-causing compounds, so the liquid that comes out of the digester is virtually odorless. Also, when spread on the fields, it is absorbed more quickly by the crops, reducing runoff problems.