The bankruptcy of an Irish carbon offset company reaches all the way to California as the state considers establishing a carbon trading market. Despite filing for bankruptcy in Dublin in February, the company, AgCert, is still selling credits to offset carbon emissions related to travel, including to the California Climate Action Registry. It also has sold credits to a University of California campus and sells to individual motorists through a website operation based in Florida. AgCert’s bankrupty filing came after the company acknowledged that it failed to deliver offset credits it sold last year. It concluded that it had little chance to deliver but a fraction of the millions of tons of credits it is under contract to provide this year. In a terse statement, the company said its “forward sales commitments exceed AgCert’s current production capacity.” It noted it had been unable to renegotiate contracts with all of its customers and creditors. As a result, the company “requested suspension of its shares” and legal protection while the court works out “a scheme of arrangement with its creditors and members.” AgCert, which experienced meteoric growth after being founded in 2002, has been producing carbon offsets tradable under the Kyoto Protocol by building and operating scores of manure-to-energy projects at major confined animal feedlot operations in Brazil and Mexico. The projects result in lower levels of greenhouse gas emissions from the operations than would occur if the manure was left to decay. However, trouble broke out last year at AgCert--which billed itself in 2004 as “one of the largest sellers of carbon emissions reductions” in the world--when it could meet only 32 percent of its May delivery obligations to customers, which include major companies like BP, BHP Billiton, and the Irish utility ESB. All face the need to either reduce their carbon dioxide emissions or provide offsets to comply with carbon limits under the Kyoto Protocol. (The Kyoto treaty requires the industrialized countries that ratified it to reduce their overall emissions by 5 percent from 1990 levels. The caps, which expire in 2012, will not go into effect until next year. But participating nations have spent several years scrambling to get ready. The European Union has already instituted caps on its member nations. This has fueled a nascent carbon-permit trading system. Countries and companies that can’t meet the new requirements can buy emissions permits from others that can. Trading in permits hit $30 billion in 2006, according to the World Bank.) The company also struck a deal with the European energy trader EDF trading, which holds major positions in carbon trading markets. In the United States, AgCert operates DrivingGreen.com, which is offsetting emissions for travel to and from the Climate Action Registry Conference later this month in San Diego, and has previously offset emissions from cars used by the University of California, Santa Barbara. AgCert also operates under the name TurboGreen in the U.S., which focuses on industrial offset projects, according to Duane Toenges, AgCert manager of U.S. carbon emission project development. The U.S. credits, he explained, are voluntary and not used to meet compliance obligations at this point like those faced by BP and other companies operating in Europe, but might be in the future as carbon reduction requirements are developed by states and potentially the federal government. Offsets sold by the company under the TurboGreen label in the U.S.--on the Chicago Climate Exchange, and potentially later in California and in the Northeast under the Regional Greenhouse Gas Initiative program, as well as in private market transactions--are accounted for under protocols developed by the California Climate Action Registry, said Toegnes. He only would discuss the company’s U.S. programs and not its financial problems. (A spokesperson for the company headquarters did not make a person available for this article. Thus, much of the information is drawn from various AgCert documents.) The registry is using AgCert’s DrivingGreen.com program to offset the emissions of all who are attending its conference in San Diego based on their mode and distance of travel, according to Katharine Fatton, marketing assistant for the organization. She said that the credits are verified by Scientific Certification Systems. The University of California at Santa Barbara bought credits from DrivingGreen.com in 2006 to offset emissions from vehicles it operates, said Perrin Pellegrin, campus sustainability manager. The company offered “special pricing,” she said. UCSB received a “certificate” for the credits, according to Pellegrin, which hangs on the wall of the transportation department. However, she added, she was unaware if DrivingGreen.com produced the credits in accordance with any certification process. Offsets obtained through DrivingGreen.com are “serialized” and “registered” in the company’s proprietary database to make sure they are not double counted, Toegnes said. Those purchasing offsets, which are produced by manure-to-energy projects on Midwest farms, receive a certificate. Individuals offsetting their emissions from the company’s website also receive a tee shirt and a bumper sticker. AgCert also claims to be “an approved vendor for Environmental Defense’s FightGlobalWarming.com” program. Environmental Defense carbon market specialist Ron Luhur said that the environmental organization has used AgCert in the past to offset some of its own emissions. He added that in the past the organization also featured a couple AgCert projects in Mexico as sound sources of offset credits for would be buyers. Underscoring the international aspect of climate change, AgCert produces the offsets for its European customers through projects registered under the Kyoto treaty’s clean development mechanism, which is administered by the United Nations Framework Convention on Climate Change. It allows companies to meet compliance obligations by investing in offsets from greenhouse gas reduction projects in the global south, the kind set up by AgCert. The theory behind the clean development provision was that it might be more economical to cut emissions in the global south than in northern industrial nations, plus that the investment would benefit developing nations. When the company realized it could not meet its delivery obligations, it went to the open market to purchase credits on behalf of its customers, but the higher carbon prices in the Kyoto market proved an impasse. It also set out to expand its business strategy to arrange offset projects in forestry and manufacturing industries in the U.S. and other nations without taking any ownership role in exchange for a cut of the credit stream they would produce. Then AgCert tried to stretch out loan repayments and renegotiate delivery schedules and obligations with its customers. It had some success, cutting its total delivery burden from 28.6 million metric tons to 18.6 million metric tons of carbon offset credits. But it had to pay off its customers, who faced higher prices for credits in the current carbon market than they paid to AgCert for credits. This drained the company’s coffers. Even after that, according to AgCert chair Merrick Andlinger, the company knew it was going to come up short. In a 2007 prospectus, the company said it expects to produce 1.76 million tons of credits this year, but has obligations to deliver 7.2 million tons. Next year it has delivery obligations of 4.1 million tons. Meanwhile, the company was planning to slash its staff after it lost 28.5 million euros in the first half of 2007 on revenue of 2.5 million euros. AgCert has yet to produce a final financial report for 2007. The company lost 93.8 million euros in 2006.
