Offsets must ensure environmental integrity, reduce emissions
Q: The idea of selling "offsets" for greenhouse-gas pollution seems to be losing some steam -- at least in the U.S. A recent media report said the demand for them is slackening, thanks to the economy, to the failed attempts at creating a sweeping international climate accord in Copenhagen, and to the gridlock on climate on Capitol Hill. Do you think offsets still ought to be part of wide-scale efforts to tackle climate change, either in the U.S. or around the world?
Offsets should continue to be part of the global and U.S. solutions to addressing climate change as long as they ensure environmental integrity and reflect real reductions in emissions. Offsets provide a valuable cost containment mechanism for regulated entities to meet their compliance obligations, and on the international level they can have a valuable capacity building element because developing country partners will see a carbon price value and learn about what constitutes environmentally sound emission reduction efforts.
The declining market demand and price for offsets may be due to the uncertainty about the market post 2012 and the fact that the Copenhagen Accord has not yet been included in a new international treaty. Once the certainty about the architecture of climate policy regulation post 2012 is clear, the price and demand for offsets should rise accordingly. The Copenhagen Accord is a breakthrough because all of the major emitting countries have now inscribed national emission reduction targets or planned mitigation actions and have agreed to a first framework of monitoring, reporting and verification. Further development of this framework in the UNFCCC process and/or through further elaboration of national programs and actions will once again restore the demand for a credible offset market.
The structure of domestic and international offset programs is important to achieve the emission reduction and environmental goals. One way to design an international offset program is to move away from the current project-by-project basis (now covered by the UN Clean Development Mechanism) and toward sectoral credits where developing countries require all plants within a sector (e.g. steel) to be included in the reduction strategy rather than the current system where good deeds are rewarded while continuing bad actors are allowed to avoid any regulation. Parallel definitions of sector-wide credit programs by the US, Europe, Japan and other "buying countries" can create a consistent international standard that ensures offsets are comparable and of high environmental integrity.
On the deforestation front, it is preferable that countries first prove their readiness and capacity to measure, report and verify reductions in deforestation before any credits are issued. Since many programs to reduce deforestation require governmental activity to create incentives for landowners to not deforest and government enforcement activity against violators, a period of reductions that are financed through "funds" rather than through private sector purchases of credits makes sense as a second phase after capacity building and before moving to full crediting regimes.
On the domestic U.S. front, we should get as many sectors as possible into a cap and trade program and allow offsets only to those sectors that do not lend themselves well to direct regulation. Given the size of reductions that are needed to meet the 80 percent reduction below 2005 levels by 2050 included in the Waxman-Markey bill, it is imperative that as many sectors of the US economy are included in either the cap and trade program or a parallel traditional regulatory program rather than in an offsets regime.
Posted by: AGWsceptic99 | March 20, 2010 4:00 PM
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Posted by: JohnMD1022 | March 20, 2010 6:15 AM
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