11/18/2013 07:44 pm ET Updated Jan 25, 2014

California's Cap-and-Trade Program -- More Than Just a Solution for California

Throughout the world California has a well-deserved reputation for leadership and innovation. Our efforts to combat climate change continue this tradition of leadership. In passing the 2006 Global Warming Solutions Act, Californians committed to reducing their greenhouse gas emissions to 1990 levels by 2020 and began implementing groundbreaking policies to achieve this goal. The centerpiece of these policies is the world's first economy-wide "cap-and-trade" system for greenhouse gases, which launched earlier this year.

California's efforts are all the more remarkable because climate change is a global problem. No single state or country - even with the world's twelfth largest economy - can solve it alone. But as it has done with other globally important issues, California is leading by example and pursuing innovative new approaches that will ensure we are on the cutting edge of the coming clean energy revolution. Cap-and-trade fits the mold. Rather than telling California businesses exactly where and how to reduce their greenhouse gas emissions through inflexible and expensive regulations, it allows them to invent new methods and technologies and unleashes the power of the market to find creative, low-cost solutions.

An important element of California's cap-and-trade program is its inclusion of "carbon offsets." Offsets allow companies to reduce emissions by funding activities that would otherwise not occur, and that are not required by law or regulation. For example, a business in California could meet its obligation to reduce emissions by paying for the long-term preservation of a forest, which would otherwise release carbon dioxide (a primary greenhouse gas) after being logged. Because the effect of greenhouse gases is global a reduced ton of carbon dioxide emissions in Maine or even Brazil is just as effective as the same ton reduced in California. And because offsets are less expensive than reducing emissions directly, they lower the cost of achieving California's reduction goals. This means lower costs for California businesses, cheaper energy prices for California consumers, and a more vibrant and future-looking economy - all without sacrificing the goal of fighting climate change.

A recent L.A. Times op-ed ("A flaw in California's cap-and-trade plan," November 14) questions the use of offsets in California's program. Unfortunately the authors grossly mischaracterize how offsets actually work, and offer deeply flawed conclusions about the effects of their inclusion in cap-and-trade. California's standards for carbon offsets were developed over many years in consultation with numerous experts and stakeholders from around the country. These rules are considered the strictest in the world and have been upheld in court for their effectiveness. They target activities - such as improving forest management, capturing and destroying methane generated by livestock manure, and the destruction of highly potent chemicals used in refrigeration equipment - that simply would not happen otherwise because they are not financially viable without the added investment they can get from selling carbon offsets. In the rare instances where such activities might be expected to occur without such investment - where they are legally required, for example - the standards exclude them from eligibility. This ensures that California gets only real greenhouse gas emission reductions that go beyond what would have happened anyway. For forestry-based offsets, which keep carbon out of the atmosphere by storing it in trees, the standards contain strict requirements for ensuring that the carbon stays out of the atmosphere for the next 100 years. Any release of carbon from these forests, whether through fire or intentional harvesting, must be compensated for through the generation of additional reductions.

The authors also directly question the use of offsets generated by programs for reducing tropical deforestation - which accounts for more than 12 percent of all human-caused greenhouse gas emissions globally. Contrary to the authors' assertions, the best way to address such deforestation is not to curb wasteful consumption, but to improve the welfare of people living in forest communities by providing them with sustainable livelihoods that preserve these valuable resources rather than destroy them. Transformative investments in the form of carbon offsets are one of the key tools to accomplish this, and California is helping to drive current global thinking about how it could be done.

Perhaps the authors' biggest oversight is their failure to appreciate what California is trying to achieve and the central role of carbon offsets in achieving it. Climate change is a global problem that ultimately demands global solutions. A "California only" approach simply won't cut it. The goal is to lead the way to globally effective solutions, and the inclusion of offsets in California's program demonstrates how low-cost measures throughout the country - and potentially the world - can be integrated in domestic climate policies. Offsets build bridges to other states and countries, raising awareness, building local knowledge, and demonstrating how they, too, can address climate change and transform their own economies. Ultimately it is only by building these bridges and promoting wider collaboration that California, and the world at large, can prevent climate change.

Co-written with Linda Adams, Former Secretary for Environmental Protection, California Environmental Protection Agency