Personal net zero? Gas utilities pitch offset plans.

By Jeffrey Tomich | 02/15/2024 06:55 AM EST

The programs aren’t eliminating emissions from natural gas. Instead, they’re tapping into a huge carbon offset market.

Photo collage of a Natural gas pipeline sign, money, a forest with a CO2 recycling symbol

POLITICO illustration/Photos by iStock, AP

Gas utilities are increasingly urging customers to join in on their “net zero” journeys by pushing voluntary programs that allow homeowners and businesses to reduce emissions from furnaces, water heaters and stoves through an extra monthly fee.

In northern Indiana, NiSource says customers can pay to designate a percentage of their gas use to come from “renewable” sources. In Michigan, DTE Energy customers can join the utility’s “Natural Gas Balance” for $4 to $16 a month. In North Carolina, Duke Energy’s Piedmont Natural Gas sells carbon mitigation in $3 “GreenEdge” blocks with each representing about a fourth of an average residential user’s emissions.

The programs are not eliminating emissions by reducing fuel use. They’re mostly delving into the multibillion-dollar market for carbon offsets — heavily scrutinized financial instruments that represent a metric ton of carbon dioxide-equivalent that’s either prevented from entering the atmosphere or removed from it.


While some offsets are derived from local forest management projects, others are being sourced half a world away. NiSource’s Northern Indiana Public Service (NIPSCO), for instance, bought offsets in December from a wind energy project that powers a textile mill in southern India, company spokesperson Joshauna Nash said in an email.

The use of offsets by utilities has elicited backlash from environmental and consumer advocates, who have broadly labeled the utility programs as “greenwashing.”

Other critics question whether monopoly utilities should be selling offsets that allows them to claim an environmental benefit while maintaining or even increasing gas sales rather than investing more in solutions that address the root cause of the climate crisis.

“There’s already a technologically feasible, cost-effective alternative to current fossil fuel heating,” said Kiki Velez, an advocate with the Natural Resources Defense Council. “And that’s building electrification and energy efficiency.”

Utilities’ embrace of offsets, an idea that has support from their trade association, the American Gas Association, coincides with growing pressure to address the contribution of climate-warming pollution from the combustion of natural gas in buildings. According to EPA, direct greenhouse gas emissions from residential and commercial buildings accounted for 13 percent of the U.S. total in 2021.

American Gas Association officials declined to be interviewed. But in a blog post last year, the group promoted the use of offsets as a way to help consumers “negate” their emissions from burning gas.

Nationwide, utilities have responded to pressure from investors by establishing “carbon neutral” or net-zero emissions climate goals, which in some cases lean partially on the purchase of carbon offsets.

Ben Massie, a vice president at Anew Climate, one of the nation’s largest carbon offset developers, described offsets as just one element of a broader portfolio of strategies to help companies like DTE achieve net-zero goals.

They especially have a role to play helping hard-to-decarbonize industries mitigate emissions in the near term while technologies like carbon capture and “green” hydrogen produced with renewable energy continue to develop, he said. And while electrification can reduce consumer gas use, especially as more renewable power greens the grid, offsets can help now.

“That’s exactly what they’re meant to do — help them along their way and help them take action now,” Massie said. “They are a bridge to net zero.”

Matthew Kotchen, a professor of economics at Yale University’s School of the Environment, said there needs to be greater scrutiny of offsets and voluntary carbon markets.

At worst, offset programs that don’t deliver what they promise can lead to increased emissions by giving participants false confidence that they can buy their way out of burning fossil fuels, he said.

But Kotchen said they have a legitimate role to play in decarbonizing the economy — and that there’s no doubt they’re producing tangible climate benefits and “pushing things in the right direction.”

“Yes, we could do better,” he said in an interview. “There could be more standardized approaches and transparency. But I don’t think that all this stuff is complete greenwashing.”

The ‘Big Wild’

The pitch from utilities to climate-conscious consumers is both simple and appealing.

In Michigan, DTE’s Natural Gas Balance program is promoted as a way for customers to support development of renewable natural gas and through the purchase of carbon offsets that protect Michigan forests. In marketing materials, the utility urges consumers to “increase your impact on climate change by … moving up to the next level” of support.

While the idea was presented to Michigan utility regulators as a “voluntary renewable gas” program, just 5 percent of the cited environmental benefits come from the purchase of certificates associated with renewable gas projects, where methane from landfills and agriculture is trapped, cleaned and substituted for fossil-derived gas. The other 95 percent comes from offsets.

DTE executives declined to be interviewed. But spokesperson Dana St. Coeur, said more than 13,000 customers have enrolled since the program was approved by the Michigan Public Service Commission. That includes the city of East Grand Rapids, the first municipality to join, doing so last summer at the 100 percent level.

St. Coeur said the program tied to the utility’s climate goal, laid out in 2020, aims to achieve net-zero greenhouse gas emissions by 2050 goals for its own operations and from its gas supply as well as a 35 percent reduction by 2040 in downstream emissions — or so-called indirect or Scope 3 emissions.

The DTE program is only one of several tools the utility is offering customers to reduce emissions, she said. Another is energy efficiency.

“DTE recognizes there is not a single solution to the challenge of emission reduction, and we are committed to offering customers opportunities to manage their emissions that align with their values, lifestyle and budget,” St. Coeur said in an email response to questions.

Most of the carbon reduction benefits cited by DTE come from the purchase of offsets from a carbon sequestration project in Michigan’s 105,000-acre Pigeon River Country State Forest, known as the “Big Wild.” It is described by the Michigan Department of Natural Resources (DNR) as “a unique, rustic area … that a young Ernest Hemingway called ‘wild as the devil.’”

As DTE describes it in the report, the offsets being purchased on behalf of its customers “limit aggressive tree harvesting throughout Michigan.”

Despite those assurances, though, an FAQ page on the website of the Michigan DNR, the project host, suggests little has changed with how the forest is managed.

“It is not anticipated that the carbon projects will appreciably affect management and timber harvests levels from the forest,” the DNR website says.

The seemingly contradictory messages, first reported by Bloomberg, have drawn criticism from environmental advocates.

“It's not going to reduce carbon emissions or increase sequestration from our point of view,” said Tim Minotas, deputy legislative and political director for the Michigan Chapter of the Sierra Club.

Scott Whitcomb, director of the Office of Public Lands at the Michigan DNR, and officials with Anew Climate, the developer of the Big Wild project, said the source of carbon benefits for which the state is being paid are misunderstood.

In separate interviews, they said the sequestration benefits come not from measuring current tree harvest levels against those from years leading up to the start of the project in 2020 — but against the potential for more aggressive tree harvesting had the project not happened.

“What [the DNR] is saying is that it may not be dramatically changing the harvest levels that had been going on in recent history. But it doesn't mean that it wouldn't be a change of what would be happening today right now and in the near future if there had been a prioritization of different ecological benefits,” Joshua Strauss, a senior vice president at Anew, said in an interview.

Whitcomb said DNR will continue to harvest a certain amount of timber in the forest because the area is home to Michigan's elk herd and young regenerating forest is critical habitat. That doesn’t mean management of the forest hasn’t changed.

“We're still going to be doing some things differently with respect to how we manage the forest, and we're still going to be sequestering the carbon that's accounted for,” he said. “So those credits are real.”

Minotas of the Sierra Club remains unconvinced.

“Unless the forest owner, the DNR, is reducing harvest levels and increasing reforestation efforts as a result of the payments it receives and not as a result of their forest management plan that they are changing on their own … the program from our point of view is meaningless,” he said.

'Green' programs

Controversy over carbon offsets aside, there’s also debate whether monopoly utilities should be in the business of selling a product that consumers can easily purchase elsewhere.

While utilities in Michigan and other states have gotten approval from regulators to offer offset-based programs to consumers, utility commissions in states such as Pennsylvania and Kentucky have denied similar proposals.

Last fall, the Kentucky Public Service Commission (PSC) rejected a program put forward by Columbia Gas, also a unit of Indiana-based NiSource.

The proposed Green Path program — which offered customers the chance to offset 50 percent of their carbon emissions or go “net zero” and offset 100 percent — was virtually identical to the one being offered to customers of affiliate NIPSCO in Indiana.

But Kentucky regulators said no, citing flimsy market research supporting the idea. In its order, the state PSC said “the purchase of environmental attributes does little, if anything, to address decarbonization goals specific to interested consumers.”

Columbia Gas dropped proposals in Ohio and Maryland after consumer advocates pushed back.

The Maryland Office of People’s Counsel tore apart the utility’s Green Path plan, saying it burdens nonparticipants with administrative costs and doesn’t reduce greenhouse gases in the state. Most critically, the state consumer advocate representing residential utility customers said the program was misleading.

“This type of deception, designed to make consumers feel better about actions with little actual environmental benefit, is known as ‘greenwashing,’” Michael Sammartino, assistant people’s counsel in Maryland, said in a PSC filing.

Even where programs have been approved, there’s been similar concern about how utilities are representing them.

In Michigan, state regulators approved DTE’s program after requiring the utility to rename what was initially proposed as a “renewable natural gas” program because 95 percent of the environmental benefits would be derived through the purchase of carbon offsets.

The PSC also required DTE to file an annual report with details on the program’s financial and environmental performance as well as details on marketing and participation.

In a report filed last year, DTE said the program “negated” the equivalent of more than 12,000 metric tons of CO2 in 2022 — the equivalent of taking more than 2,600 cars off the road.

However, while DTE collected more than $440,000 from its customers to support the program, less than $100,000 was used to purchase offsets.

Meanwhile, according to the annual report filed with the PSC, the utility spent $1 million to market the program through social media, email, bill inserts and telemarketing. There was a tailgate event at the University of Michigan football game. The utility also paid $2,600 for marketers to go door-to-door.

Overall, the program showed a $1.1 million net loss for 2022, though DTE said marketing costs were not collected from ratepayers.

The loss notwithstanding, DTE is forging ahead with the program, telling the PSC that it intends to seek a three-year extension as it continues “experimenting with marketing and sales tactics.”

To the south in Indiana, NIPSCO’s Green Path program launched just over a year ago and has been slow to get traction.

Company officials declined to be interviewed. But Nash, the NIPSCO spokesperson, said that just 357 of the utility’s 821,000 customers have enrolled in the Green Path program approved by Indiana regulators in December 2022.

Like the DTE program, Green Path consists of 95 percent carbon offsets and 5 percent renewable natural gas certificates. Unlike in Michigan, offsets aren’t procured from in state. Instead, certificates are purchased from New York, according to NIPSCO’s website, and carbon offsets come from India.

Unlike Michigan, Indiana regulators don’t require NIPSCO to publicly file financial disclosures about the program. Nash said the program is not connected to the utility’s carbon goals, which only relate to the utility’s own emissions (Scope 1) and its suppliers’ (Scope 2).

Debate over the use of offsets to help utilities and their customers achieve climate goals is far from over.

A proposals by Missouri’s dominant gas utility, Spire, is pending at the state Public Service Commission. Xcel Energy has proposed the use of offsets as part of broad portfolios of strategies in Colorado and Minnesota to reduce greenhouse gas emissions from buildings.

Earlier this month in Ohio, state Sen. Shane Wilkin, a Republican, testified on behalf of a bill he filed that would require state utility regulators to approve voluntary carbon offset programs if the offsets are listed on a verified carbon registry.

While the bill would appear to be a policy to combat climate change, Wilkin, who’s running for Congress, made clear in testimony to the Ohio state Senate Energy and Public Utilities Committee that the main beneficiary would be the state’s natural gas industry.

“The option to voluntarily offset carbon better positions natural gas as a viable fuel for Ohio’s future,” Wilkin said.