As Cap and Trade Dies, It's Time To Bury Offsets With It

07/23/2010 12:53 pm ET | Updated May 25, 2011
  • Steve Valk Communications Director and Regional Manager, Citizens Climate Lobby

Senate Democrats pulled the plug on climate legislation Thursday, but it's not the end of the world. In fact, the demise of cap-and-trade might be the best thing that could happen for the Earth's climate.

Although the proposal from Senators John Kerry (D-MA) and Joe Lieberman (I-CT) was watered down and industry-friendly, the argument was made that we needed to take steps now, no matter how small, to stop climate change. Whatever the flaws or shortcomings, we could fix them later.

Some flaws, however, are not fixable. And that was the case with the little-talked-about provision in cap-and-trade legislation - greenhouse gas offsets.

Greenhouse gas offsets -- also known as carbon offsets -- allow polluters to exceed their emissions cap by helping to finance projects that reduce greenhouse gas emissions somewhere else.

Sounds reasonable, right? After all, it's one big atmosphere, so what's the difference if reductions are made in one place or another?

Here's the problem: In order for offsets to really work, the emissions reductions they achieve have to go beyond what is legally required. They also have to be "additional," meaning it must be shown that those reductions wouldn't have happened without the financial incentive provided by the offset purchaser. If a project that reduces greenhouse gases would have happened in the course of "business-as-usual," it is not considered additional. Any offset purchase for such projects would produce no net reductions.

The trick, obviously, comes in establishing the additionality of an offset. In most instances, this is difficult, if not impossible, to prove.

But don't take my word on this. Laurie Williams and Allan Zabel, two attorneys for the Environmental Protection Agency based in San Francisco, just issued a whistleblower disclosure calling on Congress to investigate the unfixable flaws of greenhouse gas offsets in proposed climate legislation.

It must be noted that this disclosure by Williams and Zabel is their own opinion and isn't intended to represent the views of the EPA or the Obama Administration. That said, they each have more than 20 years working with the EPA, giving them a high level of experience with offsets and environmental enforcement issues. They know what they're talking about, and their alarm over offsets is so great that they produced a video last fall -- "The Huge Mistake" -- detailing the major flaws of the climate bills being considered in Congress. Most of that information was also presented in a Washington Post oped.

In their paper, Williams and Zabel list four unfixable flaws with GHG offsets:

1. Business-as-Usual is Not Distinguishable -- It is impossible to determine whether a particular project would not have happened but for the additional incentive provided by the offset payments (i.e., would not have ― happened anyway).

2. Activity Shifting (also called "Leakage") -- Emissions allegedly reduced by the project may simply be shifted elsewhere and there is no feasible way to track this.

3. Perverse Incentives to Keep Polluting Activities Legal -- The dual pressures to maintain offset profits and to keep the price of GHG offsets low will increase political pressure against the development of new regulations to limit polluting activities.

4. Subjectivity/Complexity/Uncertainty -- Subjective factors, along with complex and uncertain emissions calculations, are used to determine the baseline emissions and the allegedly additional reductions from GHG offsets. Along with the other unfixable flaws, subjectivity, complexity and uncertainty make enforcing additionality impossible

The 22-page disclosure goes on to explain, in much detail, each of these flaws, citing EPA protocols and examples. Worth the read for anyone concerned with getting things right -- I didn't say perfect -- on climate solutions. Certainly worth the read for members of Congress and their staff who are responsible for enacting effective legislation to address climate change.

Does the demise of climate legislation this year make discussion of offsets moot? I'd like to think so, but there's no guarantee that offsets won't re-emerge in future climate legislation. Polluters love the easy way out provided by offsets, which are usually cheaper for companies than reducing their own emissions. Alarmingly, proposals in this Congress would have allowed for 2 billion tons of GHG reductions to be provided by offsets. This means that all reductions for the next 20 years could be accounted for in a system thoroughly lacking integrity, one that allows American polluters to go about business as usual without making their own reductions. Corporate lobbyists will be working overtime to ensure that offsets are part of any future climate solution.

The best-case scenario for the next Congress would be legislation that places a steadily-increasing fee on carbon, returning the revenue from that fee to the American people. No carbon trading. No offsets. The "carbon dividend" from this fee would provide an offset of a different sort, one that shields families from the impact of rising energy costs associated with phasing out fossil fuels.

However, if any legislation emerges with GHG offsets, Congress must honor the request of Williams and Zabel for an investigation. There's simply too much riding on this to institute a phony system that fails to reverse the destructive course humanity has set.