Uber has set a goal of becoming carbon neutral by 2040, but the ride-hailing business has chosen a difficult path in areas of Latin America.
Customers in Mexico have had the choice of using "Uber Planet" since February. They can donate 0.37 Mexican pesos per kilometer to mitigate the emissions created by their rides by purchasing carbon credits for reforestation projects and a wind plant in Oaxaca.
Carbon offsets are divisive. When reducing greenhouse gas emissions is difficult or expensive, countries and businesses sometimes employ offsets to accomplish their climate goals. These allow buyers to continue polluting while paying someone else to do so in a more environmentally responsible manner.
According to Uber's own climate report from last year, the business avoided buying offsets as a key strategy, focusing instead on subsidizing its drivers to move to electric vehicles (EVs). According to Uber's research, offsets "essentially pay to make it someone else's duty" and have "weaknesses," including verification issues. However, given the embryonic EV markets in areas of Latin America, the business told a major Newswire that a switch for drivers to zero-emission EVs was "impractical" in the short term.
As a result, it is implementing the Uber Planet offset system in Mexico, Colombia, Ecuador, and Costa Rica, as well as attempts to encourage drivers to transition to electric vehicles, according to the company.
The decision highlights the challenges that transportation companies confront when attempting to minimize their carbon footprints in emerging regions where there are few viable alternatives.
Electric and hybrid vehicles account for only 6.4% of Mexico's car market, compared to 15% globally, according to data analytics firm J.D. Power. Mexico's market share is expected to reach 12% by 2030, well behind the global forecast of 50.5%.
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Uber Planet purchases credits from initiatives that have been certified by non-profit organizations including the United Nations Framework Convention on Climate Change (UNFCCC) and the Climate Action Reserve (CAR).
The goal of certification is to ensure that projects would not exist without the sale of carbon credits, ensuring that they are truly providing offsets.
According to Gilles Dufrasne, a policy officer at not-for-profit industry monitor Carbon Market Watch, one Mexican plan funded by Uber, the Oaxaca IV wind farm project, may have gone ahead without the credits.
Carbon credits would generate around a one%age point improvement in the project's internal rate of return, according to certification documents examined by a major Newswire from 2011.
Carbon credits were critical for the farm's developers to get finance, according to records submitted with the UNFCCC.
However, Dufrasne believes the small benefit raises the question of whether they are necessary.
"The entire objective of selling carbon credits is to have some means of evaluating extra (emissions) reductions that would not have occurred if the credits had not been sold," he explained. "However, if they were going to build the project anyhow, the money you're paying now is meaningless."
Danny Cullenward, an offset specialist at CarbonPlan, a non-profit research organization that also reviewed the project documents, questioned whether the sale of credits was necessary to secure financing, pointing out that the wind farm already had a deal in place for the government to buy its output at a guaranteed price.
"This isn't a risky business enterprise that needs a little help to stay afloat," Cullenward explained. "It's a commercially mature infrastructure project with a set price contract with the Mexican government."
The project was vetted under the UNFCCC's Clean Development Mechanism, according to a representative for Spain's Acciona, which owns Oaxaca IV (CDM).
"The fact that the Oaxaca IV project was included in the CDM mechanism is confirmation of the wind farm's support to the UN's sustainable development goals," the spokeswoman stated.
Requests for comment were not returned by the UNFCCC.
According to data on Uber's local website, the wind project accounts for around 16% of Uber Planet's carbon credit sales in Mexico. Between February and August, it purchased 8,668 credits from Honduran carbon credit broker Anaconda Carbon, nearly 1,400 of which were from the project.
Anaconda was referred questions about the project by Uber.
According to a major Newswire, Anaconda President Christian Giles stated that the wind farm had been fully evaluated and that revenue from carbon credits was critical to its success.
"That argument was examined, not just by a third independent party, but also by the UNFCCC," he stated, referring to the United Nations Framework Convention on Climate Change.
'DOUBLE THE TIME' is a phrase that means 'double the effort.'
Activists, investors, legislators, and even competitors are pressuring businesses to reduce pollution.
Uber now has new competitors in Mexico City, such as Beat Tesla, which operates an all-electric Tesla fleet. Meanwhile, Didi Global, a Chinese company, claims to have 1,600 hybrid or electric vehicles in Mexico.
Uber claims to be committed to reducing emissions.
"Every market in which Uber operates will take aggressive measures to build locally relevant initiatives that align with our commitments. We're providing Uber Planet right now because we recognize the need to address this problem as soon as possible "According to David Mnguez, a spokesperson for Uber in Mexico.
He said the firm would take steps "within the coming months" to entice more drivers to switch to electric or hybrid vehicles, including lower vehicle prices and incentives such as an extra 10,000 pesos for every 160 trips.
He anticipated that by 2022, moreover 600 of its Mexican drivers would be able to switch to an electric or hybrid vehicle. In the United States, Uber has roughly 200,000 drivers and delivery partners.
EVs are out of reach for most Mexicans, whose average daily wage is less than $21, and the country lacks the tax incentives and charging infrastructure needed to entice drivers to make the move.
"We will go to it, but it will take more than twice as long as it will in the rest of the world," Gerardo Gomez, director, and national manager for J.D. Power in Mexico, projected.