International offsets will not be available in sufficient quantities in the early years of a cap-and-trade program to effectively control costs to the US economy, according to a new report by the bipartisan National Commission on Energy Policy (NCEP).
The NCEP study, “Forging the Climate Consensus: Domestic and International Offsets” notes that successful domestic and international offsets systems are vital to reducing domestic and global emissions. But the paper finds that an effective cost containment mechanism–likely a permit price floor and ceiling– in US cap and trade legislation would ease the pressure for a short-term reliance on international offsets as the primary mechanism for containing overall program costs.
NCEP argues in the paper that without effective, additional cost containment provisions there will be a tendency to push large quantities of offset credits into the system, which could lack environmental integrity, especially in the early years of the program when markets have not matured.
The paper also notes that while the House-passed climate legislation would allow as many as 1.5 billion tons of international offsets, in the early program years there will likely be only 300 million tons of international offset credits available for US purchase, further necessitating additional cost containment until the capacity to make more tons with clear environmental integrity available develops.
NCEP also argues that domestic offsets should contain both an offset market and “set-asides” of from 2 to 5% of total allowances for agricultural greenhouse gas sequestration practices, in an effort to streamline the program and allow environmentally valuable practices to qualify that might not meet stringent offset market standards.
“Domestic and international offsets are both critical to effective efforts to reduce greenhouse gas emissions,” said Jason S. Grumet, Executive Director of NCEP, and President of the Bipartisan Policy Center. “But in the early years there will not be enough environmentally sound international offsets available to reliably control U.S. costs, so additional cost containment will be needed. Effective cost containment and an environmentally-sound offsets market must go hand in hand. Domestically, NCEP believes a streamlined approach that insures the legitimacy of offsets is important to allow for greater agricultural reductions. “
A report published earlier this week by Friends of the Earth also called attention to carbon offsets, stating that they are a flawed approach to combating climate change.
NCEP reports are are available at the link below.
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