Criteria for Greenhouse Gas Offsets in Cap-and-Trade Systems

The Offset Quality Initiative (OQI) has issued a white paper offering recommendations on how greenhouse gas offsets should be incorporated into cap-and-trade policies.

The paper “Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets Into Cap-and-Trade Policy,” provides a laundry list of guidelines to ensure the integrity of offsets and ensure consistency.

The OQI is a coalition of six leading non-profit organizations—The Climate Trust, Pew Center on Global Climate Change, California Climate Action Registry, Environmental Resources Trust, Greenhouse Gas Management Institute, and The Climate Group.

A rigorous and adaptable offset program design can ensure that offsets play a valuable role in an effective cap-and-trade system.

According to the paper, Regulatory Offset Programs should:

Ensure High Environmental Integrity. Environmental integrity—defined as the achievement of real, measured reductions in emissions—should be the primary objective of any offset policy.

Be Accurate. Quantification and baseline assessments should strive to be accurate in the accounting and calculation of GHG emission reductions. Methodological selection should be conservative to ensure that offsets are not overestimated and uncertainties are reduced as far as practicable.

Ensure That Offsets are Not Double Counted. Only one ton of offset credit should be created by one ton of GHG reductions, and this credit should only be allowed to count once towards any GHG reduction requirement.

Include Multiple Greenhouse Gases. GHG regulation should, at a minimum, cover all six categories of greenhouse gases: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), perflurocarbons (PFCs), hydrofluorocarbons (HFCs), and sulphur hexafluoride (SF6).

Include Broad Sector Coverage. Offset policy should be designed to take advantage of a wide variety of emission reduction opportunities in uncapped sectors where acceptable standards of offset quality can be met.

Not Restrict Offset Eligibility by Geographic Source. Because GHGs accumulate both uniformly and globally in the atmosphere, the location of an emission reduction is immaterial to its climate change impacts.

Establish Reasonable Offset Crediting Periods. Predefined project crediting periods send important market signals to project developers and other market participants, but regulators will have to carefully assess the relative merits of different crediting periods on various project sectors and types when crafting offset rules.

Exclude Forward Crediting But Allow Forward Selling. Credits should only be issued on an ex post basis after reductions have been verified, and thus forward crediting should not be allowed.

Avoid Quantitative Restrictions on Offset Supply and Use. By lowering the cost of the total system, the use of offsets could allow for the implementation of a more stringent cap, which would result in even greater emission reductions in both the near- and long-term.

Be Transparent. The standards and processes governing offset projects should be developed and implemented in an open and transparent manner and well-defined in regulation in order to ensure credibility and reduce uncertainty for investors.

Incorporate Hybrid Offset Project Assessment Methodologies. All potential offset projects must be assessed both to determine their eligibility and to establish a means of quantifying the reductions.

Allow for Adaptation and Adjustment. GHG emission-reduction systems should be flexible yet comprehensive.

Have a Centralized Offset Program Administrator. This authority should have the ability to make necessary decisions and should be capable of doing so in a timely and transparent fashion

Link With Other GHG Trading and Offset Systems. Where practical, emerging regulatory regimes should be designed to be as compatible as possible with other existing and emerging regimes, both domestically and internationally (as long as those regimes have high environmental integrity).

Comments

[kebu77:]

Note to lawyers: Learn what you need to know to cash in on the booming field of cap and trade litigation!

Maybe carbon taxes with offsets on corp. income and wage taxes would be simpler?

2008 Jul 31 10:40 AM

[JPJR:]

This is all the biggest boondoggle in history. Who is paying for it, and why would any industry operate under it? I hope we can keep a few of our businesses in the US and please, just a few jobs.

2008 Jul 31 01:55 PM