Monday, March 19, 2007

Climate forecast: Corruption

When I was a reporter looking for the next area of government corruption, I used timeless principles to guide me. I looked for politicians with a proven record of corruption and then looked in the areas they controlled that had the most money passing through with the least oversight.

It is a formula that is almost as bullet-proof as a math equation.

Where, under Illinois Governor Rod Blagojevich, will be the next swamp pit of cronyism and insider dealing? My money is on the "green" industry, where all the warning lights are blinking red.

The dots are not difficult to connect. Last month, Illinois and New Jersey, two of the three most corrupt states in the country, announced they were going to reduce greenhouse gas emissions significantly in the years ahead.

Whatever measures Illinois takes to achieve those reductions will probably include carbon offsets, a scam we identified here. A press release says the state already has committed to working with the Chicago Climate Exchange, a company that deals with carbon offsets, among other things.

BusinessWeek in an article this week said the carbon offset business is growing like crazy. It also says that the results that are being produced are often non-existent and that the industry already is riddled with payoffs for middlemen.

As the offset market now works, intermediaries typically pocket a big portion of the money coming in. Consider two projects in the TerraPass portfolio that are run by dairy farmers in Princeton, Minn., and Lynden, Wash. Several years ago, the farmers had installed expensive equipment that uses methane from cow manure to generate electricity. In theory, the promise of offset income encourages farmers to invest in such equipment. TerraPass typically sells offsets for about $9 per ton of carbon dioxide, or the corresponding amount of methane. The company takes a cut of that $9, but won't say what the percentage is. A broker that introduced TerraPass to the dairy farmers also took a cut. In the end, the farmers say they each received less than $2 a ton out of the original $9. Darryl Vander Haak, the farmer in Washington, says he's happy with the $16,000 he earned last year from offset sales. But offsets didn't factor into his decision to start the methane venture, he adds.

Blagojevich…lots of money…little oversight. Chances are, his pals already are scheming green.

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