GE Earth Rewards: Credit Where (Carbon) Credit Is Due

General Electric today is introducing Earth Rewards, a credit card aimed at reducing cardholders' carbon emissions. It's perhaps the most visible sign yet that climate change is reaching not just the mainstream, but Main Street.

A carbon-reducing credit card from GE may seem incongruous at first, but even a cursory look connects the dots. GE Money, GE's consumer and small business financial services unit, provides private-label credit card programs and other services for national and regional retailers in 55 countries. And GE's Ecomagination initiative has committed the company to introducing new environmentally focused products and services. So, Earth Rewards is GE Money's contribution to GE's overall goal of making money by helping its customers become cleaner and more efficient. (Note: GE is a client of GreenOrder, with which I am affiliated.)

The Earth Rewards card will invest 1% of consumer purchases made with the card in carbon offset projects. (Consumers can opt to get a half-percent cash back, in which case only one-half percent of their purchases will fund offsets.) The company isn't claiming that the card will necessarily render purchases "carbon neutral," though its promotional material explains that an average consumer charging $750 per month on an Earth Rewards card -- that's $9,000 a year in purchases -- would offset all of the emissions he or she is likely to produce in a year.

The launch of the card is accompanied by the release of a standard for carbon credits in the United States. The standard, which will be used by GE's joint venture with AES Corp. to develop and sell carbon credits, aims to ensure that the offsets purchased by GE on behalf of its credit card customers "are scientifically verified and provide a positive, measurable environmental benefit," in the words of the company. AES and GE plan to generate 10 million metric tons of greenhouse gas credits annually by 2010, some of which will be purchased by GE itself on behalf of its Earth Rewards customers.

According to GE:

If 100,000 cardholders spend $750 per month, the annual offsets retired would total approximately one million metric tons, equivalent to removing more than 175,000 cars from American roads for one year. If those 100,000 cardholders receive their statements electronically, they could save more than 50,000 pounds of paper, sparing 600 trees and more than 500,000 gallons of wastewater associated with paper production collectively.

GE turned to GreenOrder to help develop the standard. Among GE's concerns were that given all the questions over the quality and authenticity of some carbon offsets, that theirs would be seen as credible. "GE realized that there was controversy about the offset market, about whether carbon reductions were really resulting from the offsets," says Nicholas Eisenberger, GreenOrder's managing principal. "And they realized that they have a lot at stake in addressing those concerns proactively."

GreenOrder and GE consulted with the World Resources Institute, The Nature Conservancy, ClimateCHECK, the Pew Center for Climate Change, and others, and conducted an evaluation of the major global standards for offsets -- both regulated and mandatory -- in order to craft a standard that addressed things like additionality, verification, and the myriad other techno-geeky issues surrounding offsets. You can download the standard here (PDF).

GE's market research found that the promise of Earth Rewards appealed to consumers. "We found that consumers had increasing interest in how they could take steps to make a change to address global warming," Peter O'Toole, director, public relations at GE, told me this week. "In theory, people want to contribute to make a positive change to address warming. Realistically, it has to be a baby step."

GE explored various ways to make the card appealing to consumers. For example, one idea was to give consumers credits toward the purchase of such things as Energy Star appliances or compact fluorescent light bulbs (both of which GE makes). "What we found was that a fairly small group of consumers would go out and do that," says O'Toole. "And a large subset of that small group is the kind of active green that already would have done these things. So this wouldn't be attractive to that group."

In the end, GE determined that Earth Rewards had to appear similar to existing credit card reward schemes. GE found that the combination of cash back and offsets received the most enthusiastic response. (However, purchasers applying for the card will find that 1% for carbon offsets and no cash back is the default offering.) Says O'Toole: "We worked hard to figure out a tipping point that would get an enthusiastic response from consumers and I think we've found it."

GE's isn't the first carbon-focused credit card -- or the last. In March, the Dutch-based Rabobank introduced the Climate Card, which claims to offset consumer purchases. Earlier this month, U.K.-based Barclay Bank announced the Barclaycard Breathe card, which will "donate half of all profits to carbon reduction projects around the world." It's unclear exactly how the bank will calculate "profits," but Barclay has guaranteed at least £1 million (just over US$2 million) in donations towards environmental projects in its first year.

Stateside, Bank of America is readying plans to introduce its own card, probably in the next few weeks, contributing a portion of consumers' purchases to an environmental organization to invest in carbon offset projects. And there are still other climate-focused credit card schemes forthcoming from smaller, start-up ventures, often in partnership with leading environmental groups.

Can all of this actually transform our consumptive behavior? Is GE joining the teeming masses of marketers seeking to encourage consumers shop their way to environmental redemption? GE's O'Toole readily acknowledges that Earth Rewards is no silver bullet. "You can't spend your way to completely solve your own contribution to climate change," he says. "This is just one tool in a toolbox of things people should be using to reduce their carbon footprint." Toward that end, the Earth Rewards website offers calculators and other tools. GE says it will be sending monthly communications to customers to give them feedback on how they are reducing their impacts.

It's too early to tell, of course, but Earth Rewards has the potential to catch on with the large middle market increasingly concerned about climate change but willing to make only small, incremental changes, if that. (GE envisions a potential market of 25 million Americans.) Earth Rewards doesn't require consumers to change habits: It's a conventional credit card with a green sheen. Some would say that's a bad thing -- consumers need to make radical changes in their daily habits -- but it's also a realistic approach.

Incremental realism versus radical change: I'll bet a lifetime of carbon credits on the former, any day of the week.

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Comments

[Danna]

"The Earth Rewards card will invest 1% of consumer purchases made with the card in carbon offset projects. (Consumers can opt to get a half-percent cash back, in which case only one-half percent of their purchases will fund offsets.) The company isn't claiming that the card will necessarily render purchases "carbon neutral," though its promotional material explains that an average consumer charging $750 per month on an Earth Rewards card -- that's $9,000 a year in purchases -- would offset all of the emissions he or she is likely to produce in a year."

I'm sorry, but this simply doesn't add up. 1% of 750.00 is $7.50 x 12 is $90.00. That simply cannot offset a single American's carbon emmissions for a year in any real way. Additionally, I find this disturbing because it is promoting more consumerism, i.e., the more you consume the more your carbon emissions will be offset, yet the more you consume, the more your carbon emissions go up. And I would guess that the 'more consumerism' is not itself offset by the 1% donation.

Joel I like your essays and have learned much from them, but I've got to wonder where you were with this one.

[Jeb]

You've have made a safe and profitable bet for GreenOrder and for GE Joel. Incremental change is "realistic" when the problem is approached from an exploitive political and marketing standpoint. But, as you know, Global Warming is not an incremental problem. It's a radical problem that will require radical solutions as we approach the climatic tipping point (that we may have passed already). In your last article you brought up the issue of Green mushiness while now you're actively contributing to it. People will use the "Earth Rewards" credit card to hold up as a way to (falsely) absolve themselves of responsibility and guilt. Much the same way that you appear to be using this blog.

[Ben Roberts]

How about a card that provides you with estimates for the GHG your purchases generated and gave you reports that helped you understand and reduce those emmissions as well as options for offsetting some or all of the total? Obviously there are some technical challenges with the data, but as we move towards fuller accounting of carbon, it should become easier to produce such numbers.

[Steve]

Danna is incorrect. $90 is sufficient to offset a typical American's carbon footprint. Depending on how you count, a typical footprint is about 10 tons (direct energy use) or 23 tons (which you get by dividing total US greeenhouse gases by US population). CCX tons currently sell for $3.70. Many certified and high quality projects can be funded for less than that--or GE can even develop their own projects, since they have a lot of money.

On the point about consumerism, I partially agree. However, the fact is that most people will continue to use a credit card anyway (I bet you have one--or several--yourself, Danna). Is it better to have 1% of their purchases go to reducing environmental harms or to VISA? I vote the former.

[Danna]

Steve,

If it is true that $90.00 a year is all that it takes for an American individual to offset their carbon outputs than it should be easy enough for all of us to take care of that without a card from which 1% of the consumption cost is put into offsets. But it really surprises me that that is all it takes. I'll have to find a legitimate offset service to invest in. I would hope that one that saves and spreads the equatorial rainforests in cooperation with the indeginouse populations would be available.

No I do not use credit cards. I consume as little as possible and buy as locally as possible when I do. I'm not interested in paying 18% or more in interests to cover my basic necessities.

[Jon Gelbard]

Steve,
Can you absolutely 100% document how $90 will result in preventing the release of carbon emissions (CO2, CH4...) equivalent to, or even almost equivalent to, an average American's annual emissions?

I'd love to see the calculations, presented simply and concretely so it's plain as day how the money we're spending to offset emissions is resulting in the carbon reductions we're paying for.

Because such clearly presented calculations are the kinds of solid assurances consumers and businesses need to really make the carbon offsets market work.

Trust me - I'm rooting for it just like all the forest conservation efforts and clean energy projects that this market has the potential to give a huge boost to!

And I hope this new standard Joel talks about works - the market BADLY needs stringent standards.

But I'll believe that $90 number when I can plainly see how my purchase of offsets is making the exact difference (in terms of lbs of carbon emissions kept of out the atmosphere) the offset provider claims it is.

If GE and Green Order's work can develop some way to meet this crucial benchmark, it would be huge boon to the carbon offsets market and a significant contribution to the fight against global warming.

[Alan P.]

Danna: I'm not sure why anywould would have to pay 18% in interest to cover basic necessities. I bet 90% of the money I spend (other than mortgage)is spent via credit card, and that's been the case for the last ten years. I haven't paid a penny in interest in that time. I simply pay my credit card bill on time.

I'm not arguing that GE's card is a good one. But it is certainly something worth talking about.

I would really like to see something that helps each of us understand our carbon footprint. Assuming one can not do "everything" to reduce their footprint, we should each have the info so we can decide which things to do and which things aren't worth the candle. For example, if you knew that eating meat once less per week saved the same amount of CO2 as junking your perfectly-good but 22 mpg car to get a new 32 mpg car, then you might just cut out the meat and stop worrying about your car choice. (just an example for discussion purposes - am not suggesting it is a real example)

[Nathan Schock]

From a post on my blog: "I say a credit card is a perfect metaphor for the entire climate change debate. We're dedicating one percent of our resources to a serious problem and then leaving it for future generations to take care of."

[mark]

I want to believe, but I can't help but equate this to "buying a star" and the Star Registry.

Will we soon find out that this is hype and companies are bilking the public out of millions of dollars. Sorry! it's hard not to be paronoid in today's world! Who isn't going to jump on this bandwagon to allow people to "buy" carbon credits. Unfortunately, people want tangible! Frequent Flyer Miles, Free Gas, and so on!

I see lots of sites that are starting to offer carbon credits. For example, based on the number of miles you drive per year, and then you should donate based on that. I want to help in anyway possible. I'm just not yet convinced this a way to go.

[darryl]

Seems to me everybody overlooked Joel's statement "So, Earth Rewards is GE Money's contribution to GE's overall goal of making money by helping its customers become cleaner and more efficient." To me that means GE is going to make big money on the consumers' fear of global warming. Using GE's estimates of 25 million customers
x $90 each equals an annual Carbon Reduction Fund of 2 Billion 250 million dollars in their coffers. Does GE put the money it collects daily into a dedicated money market/bank account? Is the interest earned added to the carbon reduction fund or does it revert to GE's general fund? Will GE provide a quarterly statment of the amount of cash in the Carbon reduction Fund? Will I, as a shareholder make money on this scheme? If so let's do it.

[Georjean Adams]

Indulgences for your indulgences. But no real behavior change. I agree with Jeb - what we need is information to make better consumption decisions. Maybe the green card will make a few people think a second about their purchase, but they will only look at the card at the checkout counter right before they swipe. Maybe they'll think before the next purchase. More likely the thought will be, "Look at me - I'm buying GREEN!"

[Gary from Think-Creditcards.com]

"If it is true that $90.00 a year is all that it takes for an American individual to offset their carbon outputs then it should be easy enough for all of us to take care of that without a card from which 1% of the consumption cost is put into offsets."

I couldnt agree more, the thing is, it's not always enough to be aware, or to spread awareness, the issues are pandemic in nature and will take a whole lot more than $90 per year. We're talking something much more valuable..effort