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Carbon Costs: Is It Easy Being Green?

Rental cars are now coming with more than just that new car smell. For only $1.25 extra, some come with carbon offsets, too.

Enterprise Rent-A-Car, along with its sister companies Alamo and National, recently launched its Keys to Green program, which asks customers to pay a little extra to help offset emissions created by its gas-guzzling fleets.

When you purchase a carbon offset, you're essentially buying a promise that through environmental projects conducted elsewhere, greenhouse gases will be reduced.

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The offsets are measured and sold by the metric ton of gases not released — a sort of environmental credit traded on behalf of green-minded consumers.

Under the program, customers can choose to purchase an offset when they make reservations. Other rental car companies offer customers options to rent more eco-friendly vehicles. Enterprise's fleet of 1.1 million cars (and 20 million annual customers) — which is the largest in the U.S. —is focusing it's green strategy on carbon offsets.

So just where does the money go?

For every $1.25 a customer contributes, the rental company adds its own $1.25, up to $1 million total, meaning that each customer “gives” $2.50 toward programs that help reduce carbon emissions.

Enterprise then passes the $2.50 on to what’s called a carbon-offset retailer. These for-profit companies, which have been springing up amid the green movement, seek out projects that work to reduce the amount of greenhouse gases in the air.

“It’s like buying a cup of coffee,” says Katherine Hamilton, the carbon-project manager at Ecosystem Marketplace, which tracks environmental commodities. “If you buy from Starbucks, you’re paying for convenience instead of going down to Guatemala and paying the farmer there. And it’s not necessarily a bad thing, either, because you’re paying to make sure the credits get properly screened.”

Enterprise and its siblings use the retailer TerraPass, which takes the money Enterprise gives it to find find carbon-offset projects it can invest in.

The San Francisco-based company focuses on projects that harness wind energy or capture and destroy methane from cattle and pig farms and from decomposing garbage in landfills.

• Click here to read more about the projects TerraPass supports.

Although it would not give an exact figure, TerraPass says this is where the bulk of the $2.50 goes — toward purchasing offset credits for Enterprise.

The projects they partner with are not mandated by the government and therefore not beholden to governmental regulation. So another service TerraPass provides ensuring that the projects aren’t scams and really do offset the amount of gases they claim to.

According to TerraPass spokesman Michael Kadish, those costs run generally in the “tens of thousand” per project, but are especially important in a voluntary market.

TerraPass says it hires third-party companies to visit the projects, inspect the sites, audit the books and verify that they’re actually reducing greenhouse gases. They also make sure the retailers aren’t conning two different companies by promising credits for the same work to more than one buyer.

These companies ensure that the carbon offsets occur in the same year they were bought, and that these gas-reduction projects are actually making a difference and wouldn’t have happened whether Enterprise customers invested in them or not.

“Offsets are still a new concept for most businesses and consumers,” says TerraPass CEO Erik Blachford. “It is critical to explain on how they work, why a good offset is an independently verified reduction and not a vague promise, and why they can be confident that their money is making a real difference.”

So let’s crunch the numbers.

On average, a car-rental customer drives about 420 miles every time he rents a car, putting out 300 pounds of carbon dioxide, according to Enterprise. So how much does it cost to alleviate 300 pounds worth of gases?

Due to competition, TerraPass wouldn't release specific financial numbers, but it did say it uses an estimate of $9 per metric ton (approximately 2,204 pounds) to determine how much each Enterprise Keys to Green customer offsets. That comes down to about $1.22 for 300 pounds of carbon gases.

But according to Evan Ard, spokesman for Evolution Markets, one of the biggest brokers of greenhouse-gas reductions in the country, the wholesale price for carbon offsets (what a retailer like TerraPass pays) is usually between $6 and $10 per metric ton.

That means it’s going to cost a company like TerraPass between 81cents and $1.36 to offset the required 300 pounds.

Depending on the price that TerraPass negotiates with the wholesaler it buys its credits from, it probably has anywhere from 3 cents to 44 cents left over after the purchase.

Your buck and a quarter, it turns out, actually goes pretty far.

And since Enterprise matches each customer’s $1.25, a renter is actually reducing closer to 600 pounds of greenhouse gases, double the amount likely to be produced during an average car rental.

As for the remainder of the money: some of that goes to oversight and some goes to profit.

According to both Hamilton and Ard, the Keys to Green program, at least on the face of it, sounds like a carefully vetted way to make a big impact on greenhouse gases at a good deal for consumers who rent cars.

However, the program is not free of criticism.

In opting for the simplicity and convenience of a flat $1.25 buy-in, Enterprise puts a disproportionate burden on customers who drive less than the average 70 miles in a rental car.

What’s more, Enterprise caps its matchings at $1 million, so once the ceiling is reached the program no longer reduces and just offsets greenhouse gases.

Still, in the voluntary offsets market, which was valued at $93 million last year, $1 million isn’t chump change, Hamilton says.

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