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William O'Keefe
CEO, George C. Marshall Institute

William O'Keefe

William O'Keefe is CEO at the George C. Marshall Institute, a think tank that promotes better use of science in public policy. He is a former COO at the American Petroleum Institute. ALL POSTS

Economy is too large for offsets

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?

Emission offsets are elegant in theory but ugly in practice. They prove that what is appealing in a scholarly paper might have a lot less appeal and practicality when attempted in practice. Simplifying assumptions are not an acceptable substitute for the way the world actually works.

The experience in the EU with offsets proves that they are not appropriate on a large scale for something as complex as emission reductions. The U.S. economy and the international economic system are just too large and complex for an offset system to work without large risks of fraud and abuse. Even if an offset system was limited to domestic activities, there are reasons to question whether it would result in meaningful and cost-effective reductions and avoid complicating unintended consequences.

Since the EU set up its trading system with offset provisions, there have been a large number of cases of fraud and companies benefitting financially for actions that they had already taken or were planning to take. Just recently, there was a report of Hungry selling credits twice and the Chinese getting paid to shut down factories that were built solely to be shut down because the payments were greater than construction costs. Traders in the offset market always seem to find a way to make money for themselves even if the actions they get paid for don't achieve their desired intent. Offset mechanisms have proven to be gimmicks that would have made Enron proud.

Occam's Razor holds that activities should be no more complex than necessary or put another way as simple as possible but no simpler. Congress has been attempting for years to design an emission reduction system that caps emissions, allows trading and offsets without doing serious damage to the economy. Each iteration has failed to meet those criteria because the legislative and regulatory mechanisms are too complex and unwieldy. Congress seems to believe that unless legislation is comprehensive and complex it cannot work. In fact just the opposite is true.

We need an emission reduction approach that is understandable, practical, and economically and technologically viable. We do not need a system that would rival the tax code in implementation.

The goal of reducing the growth of greenhouse gas emissions can be achieved by some straightforward easily verified and validated actions. First, impose a reasonable carbon tax with the revenues used to reduce the payroll tax. A clear and realistic price on carbon would stimulate innovation and action without complex regulations. Second, change depreciation rules to accelerate the turnover of older, coal fired electric power plants and remove any barriers that impede switching from coal to gas. Third, create incentives and remove barriers to adopting state of the art, commercially viable energy efficiency measures. Fourth, increase R&D and incentives to develop low and no carbon energy systems. Fifth, promote the deployment of commercial energy technology in developing countries. And finally, limit offsets to domestic measures that can be easily validated and verified through a company's public audit system.

By William O'Keefe  |  March 19, 2010; 2:20 PM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
Previous: Offsets must ensure environmental integrity, reduce emissions | Next: Let's not 'off' offsets just yet


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Reference your quoted text:

"We need an emission reduction approach that is understandable, practical, and economically and technologically viable."

We actually do not need anything of the kind. We need the 'scientists' behind this ridiculous state of affairs to release their source codes and data so their mistakes can be corrected. We need the historical record of temperatures and the current graphs of temperature anomalies to be based on facts rather than advocacy manipulations. We need to retire several 'scientists' who long ago abandoned the scientific method and any pretense of professional scientific research and publication integrity.

We need someone like the Post to start acting like a reputable repository of investigatory journalism rather than a mouthpiece for the priests of the church of global warming.

Most of all, we need these so called scientists to be given lessons in civility, humility, and fundamental scientific rules of integrity in published analytical papers. Refusing to release the data and methods except under threat of prosecution for violating FOIA laws is direct evidence that these people need to be removed from the publicly funded payroll and put on the payroll of advocacy groups like Al Gore is running. They have lots of money and should be paying their mouthpieces rather than having them live on money taken from taxpayers like me.

Posted by: AGWsceptic99 | March 26, 2010 1:09 AM
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It's a scam based on fraud and hoax.

Posted by: JohnMD1022 | March 20, 2010 6:16 AM
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It's a scam based on fraud and hoax.

Posted by: JohnMD1022 | March 20, 2010 6:14 AM
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It's a scam based on fraud and hoax.

Posted by: JohnMD1022 | March 20, 2010 6:14 AM
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