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Do carbon offsets live up to their promise?

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Many companies have nonetheless moved to make carbon neutrality part of their 21st-century brand identity. Travelocity and Expedia now offer customers the option of offsetting carbon emissions associated with their trips for a few extra dollars. In 2005, "Syriana" became the first carbon-neutral movie. In 2006, "An Inconvenient Truth" followed suit to become the first such documentary. With the purchase of 170,000 tons of carbon offsets, HSBC declared itself the first-ever carbon-neutral bank. Other companies, including Google and Ben & Jerry's – not to mention musical groups such as the Dave Matthews Band – are moving toward, or have arrived at, various levels of carbon neutrality.

And that's just the beginning, say analysts. The volume of metric tons of carbon traded on the voluntary market doubled last year over 2005. It's widely expected to double again in 2007. Of 92 companies polled by The Conference Board, a nonprofit business research organization, three-quarters were actively computing their carbon footprint. While only 15 percent were currently trading on the voluntary carbon market, 40 percent were considering it. Carbon was the topic du jour in more than two-thirds of the corporate boardrooms polled.

Carbon markets fall into two broad categories:

1. The cap-and-trade system. Countries that have ratified the Kyoto Protocol, an amendment to the global treaty on climate change, participate in this system by setting a limit, or cap, on greenhouse-gas emissions. Those companies that emit less than their allotment receive credits that they can sell on carbon exchanges. Those that emit more must purchase credits in order to avoid financial penalties. (The voluntary Chicago Climate Exchange also operates this way.) Proponents of this system trust the innovative power of the free market to promote energy efficiency.

2. The voluntary carbon market. In the United States, the market for carbon offsets is voluntary, driven primarily by corporations seeking to enhance their brand identity or to familiarize themselves with what they consider to be an inevitability.

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