The Subcommittee on Energy and Environment held a hearing titled, “The Role of Offsets in Climate Legislation” on Thursday, March 5, 2009, to address the potential role of offsets as a cost-containment mechanism in a U.S. cap-and-trade program. In his Address to the Nation, President Obama issued a call for legislation that “places a market-based cap on carbon pollution and drives the production of more renewable energy in America.” The Hearing was meant to be a step in that direction.
In heading toward a carbon cap-and-trade several of the witnesses offered their words of caution. John Stephenson of the GAO cautioned that the “challenges in the voluntary offset market and the use of offsets for compliance – even in a rigorous, standardized process like the Clean Development Mechanism – may compromise the environmental integrity of mandatory programs to limit emissions and should be carefully evaluated.” His concerns were echoed by Dr. Michael Wara of the Stanford Law School. who concluded that “carbon offsets, and international carbon offsets in particular, pose substantial risks to the environmental integrity not to mention the public reputation of a US emissions trading system.”
Taking a slightly different approach was Emily Figdor, of Environment America, concluding that carbon offsets should not be included in a federal climate program. She believes that “offsets provide less-certain reductions in emissions, thous eroding the environmental integrity of the program and potentially jeopardizing our ability to achieve science-based reductions in emissions.” More importantly, she points out that offsets “delay the transition to clean technologies in capped sectors – at a time when President Obama is calling for transformational changes in our energy future.”
That being said, there was cautious support for a cap-and-trade program. Gary Gero of the California Climate Action Registry commented that it is “the experience of the Climate Action Reserve . . . that it is possible to design and implement a credible offsets program, but doing so requires that careful attention be paid to the program’s structure and individual program elements to establish and maintain program integrity.” Likewise, both Mr. Stephenson and Dr. Wara suggested that the U.S. learn the lesson of CDM and develop a program that establishes “clear rules about the types of projects that regulated entities can use as offsets, as well as procedures to account and compensate for the inherent uncertainty associated with offset projects.” Dr. Wara stated that although “any large offset program is likely, at to some extent, to allow crediting of non-additional projects while creating incentives to defer acceptance of a cap on emissions . . . these problems . . . can to some extent be reduced by smart design choices.” This also seems to be the approach favored by Graeme Martin of Shell Energy North America.
With the hesitation on the part of the experts to jump into the cap-and-trade game, President Obama’s call may have been a little premature. There seems to be alot of work to be done before a credible cap-and-trade program can be developed that will satisfy a majority of the stakeholders.
The following witnesses were invited to testify and provided written testimony:
- John Stephenson, Director, Natural Resources and Environment, Government Accountability Office
- Gary Gero, President, Climate Action Reserve
- Emily Figdor, Federal Global Warming Program Director, Environment America
- Graeme Martin, Manager of Business Development, Environmental Products, Shell Energy North America
- Hon. Stuart Eizenstat, on behalf of the Forest Carbon Dialogue
- Michael Wara, Ph.D., Assistant Professor, Stanford Law School