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Amid growing demands from customers and investors, numerous companies in the United States are making commitments to reduce their carbon footprint. However, these declarations do not necessarily equate to a direct reduction in greenhouse gas emissions by these companies.
Many corporations choose to mitigate their environmental impact by financing others to decrease emissions through mechanisms known as carbon offsets.
This approach raises significant concerns. A prevalent issue is that various carbon offset initiatives have led to land being commandeered in economically disadvantaged regions, which in turn displaces local farmers and jeopardizes livelihoods. Additionally, verifying the efficacy of certain voluntary offsets can be problematic, as some investigations into forest-offset projects indicate that many do not capture carbon as effectively as advertised.
We propose an alternative: instead of solely buying offsets, businesses could allocate a portion of their carbon-offset expenditures towards initiatives that not only diminish emissions but also enhance the quality of life for individuals in the U.S. communities where they are located.
The research team at the Climate, Health and Energy Equity Lab at Vanderbilt University is investigating how corporate funds could be utilized to improve energy efficiency in low-income households. Our pilot study, initiated in Nashville, aims to showcase how efficiency improvements can lead to energy savings, lower carbon emissions, and decrease health risks associated with inadequately heated or cooled homes.
These enhancements could be financed through selling carbon offsets on the social carbon sector of the voluntary carbon market. The holistic benefits—economically, health-wise, and environmentally—of upgrading energy efficiency in low-income homes could appeal to companies striving to meet their sustainability goals while generating favorable community responses.
Economic and health advantages of energy efficiency
In the United States, low-income households typically allocate between 6% to 10% of their income on energy consumption. Many of these individuals face challenges keeping older, poorly insulated residences at comfortable temperatures.
For some families, energy costs can become so overwhelming that they face a dilemma of “heat or eat,” creating both physical and mental health challenges.
Our examination in Nashville identified four primary types of energy efficiency improvements that could not only curtail energy usage but also generate carbon offset credits in the voluntary market.
Through calculations, we determined that modernizing windows, upgrading refrigerators and heating/cooling systems, and insulating attics in a two-bedroom rental unit could potentially reduce carbon emissions from energy use by approximately 592 tons over 25 years.
Should the carbon reductions be packaged as offsets and marketed at a price of $30 to $45 per ton, the revenue generated could significantly offset the costs of implementing the upgrades.
This pricing aligns with other carbon offsets that have demonstrated significant and valuable social impacts. It’s plausible that the community health improvements could attract corporate buyers more than the carbon reductions alone. Nonprofits, social enterprises, or local government agencies could handle these transactions.
Due to financial constraints, many of these upgrades are out of reach for low-income families, and landlords often avoid making investments in property improvements since tenants pay utility bills.
Insights from Maine and the Southeastern U.S.
There are already initiatives in the U.S. utilizing carbon-offset funding for renewable energy and energy efficiency measures.
An early leader in this area was the Maine State Housing Authority, which tested financing upgrades through the sale of carbon offsets in the early 2000s, revealing the complexities involved in such processes.
Chevrolet’s investment of $750,000 in carbon credits from the Maine project in 2012 assisted in efficiency improvements for around 170 homes. Valuable lessons emerged from this project, highlighting the necessity for a substantial number of homes and a sufficient carbon price to ensure project viability.
A review from 2012 indicated that while each home could generate substantial carbon credits, the costs associated with project initiation and execution could tally up to tens of thousands of dollars prior to any retrofitting.
To alleviate these financial burdens, Maya Maciel-Seidman from our team developed a streamlined method for quantifying carbon reductions from energy improvements, leveraging publicly available utility data and simple field measurements.
However, this form of carbon offset, including those that back clean energy production, confronts the challenge of additionality: Would these low-income energy enhancements occur without carbon offset funding?
Our perspective is that they would not. While federal programs exist to support energy efficiency upgrades in low-income housing, historical data from the federal Weatherization Assistance Program and the Low-Income Home Energy Assistance Program indicates that a significant portion of eligible households remains unserved.
In the Southeastern U.S., a solar startup is another example of how carbon offsets can provide environmental and economic benefits locally.
Clearloop creates carbon offsets by constructing solar farms in some of the most heavily polluting regions within the U.S. electric grid. They fund solar initiatives through the advance sale of carbon offsets that reflect emissions reductions achieved during the operational lifespan of each solar installation.
Mutual benefits for corporations and communities
Utilizing carbon offsets should not replace essential emissions reductions or the public initiatives designed to eliminate energy poverty. Nonetheless, we advocate for utilizing the voluntary carbon market to finance energy efficiency upgrades in low-income homes, as it could significantly alleviate burdens faced by many families.
Furthermore, the close geographic link between corporate supporters and these community projects enhances transparency and accountability. When companies invest in locally-generated carbon offsets that also provide additional benefits to communities, they not only fortify their social license to operate but also make tangible progress toward meeting their climate objectives.
Source
phys.org