Global Warming Solutions News

"The Role of Offsets in Climate Legislation"

Statement of Federal Global Warming Program Director Emily Figdor
As Prepared for Delivery before the House Committee on Energy and Commerce Subcommittee on Energy and Environment

Thank you for the opportunity to share my views regarding the role of carbon offsets in climate legislation.  My name is Emily Figdor, and I am the director of the Federal Global Warming Program at Environment America.  Environment America is a federation of state-based, citizen-funded environmental advocacy organizations, with 750,000 members and activists in all 50 states.

Last week, President Obama issued a historic call for Congress to send him legislation that “places a market-based cap on carbon pollution and drives the production of more renewable energy in America.”

The central objective of such legislation must be to reduce global warming emissions fast enough to avoid dangerous impacts, such as a massive rise in sea levels that would inundate coastal areas.

To avoid what some climate scientists call the “tipping point,” our view is that the United States must cut its global warming emissions by at least 25 percent below 1990 levels by 2020 and by at least 80 percent below 1990 levels by 2050.

The number one imperative of U.S. climate policy must be to achieve science-based cuts in pollution.

Offsets, however, provide less-certain reductions in emissions, thus jeopardizing our ability to achieve pollution-reduction targets.

This is because emission allowances and offsets are fundamentally different. 

An allowance represents a unit of emissions.  If a facility decides to emit carbon dioxide, it must hold an allowance. 

An offset, on the other hand, represents a unit of pollution not emitted.  It is of equal value to an allowance only if it can be judged with certainty that the pollution would have been emitted, but was not, and that the emission reduction resulted from the incentive provided by the offset.

To illustrate the difference, consider two people trying to lose weight.  One person decides to meticulously count the calories of the foods he eats, with the goal of reducing his intake each day.  The second person, however, counts the calories of the foods he thinks he would have eaten that day but did not because he was on a diet.  You can imagine which of the two will be more likely to actually shed a few pounds. 

Or, consider a situation in which rising natural resource prices bring an industrial facility abroad to the verge of shutdown – a step that would reduce emissions.  A U.S. utility might agree to pay the factory owner if she shuts down the facility, thus generating offsets that the utility can use to expand its own operations.

The key question is would the factory have shut down anyway?  If the answer is yes, no additional emission reductions have been gained.  Indeed, the offset program would cause an increase in overall emissions versus business as usual.

Determining additionality requires crystal ball-gazing and so is impossible to know with certainty.

At the same time, the worthwhile goals promoted by many offset proponents to protect tropical forests and sequester more carbon in plants and soils in the United States can be achieved without jeopardizing the environmental integrity of the overall program.  Specifically, Congress could set aside a small portion of auction revenue for these two purposes. 

Emission reductions from these set-aside programs would be in addition to those required by capped sectors under the cap-and-trade program.  As a result, problems such as leakage and additionality would not jeopardize our pollution-reduction goals.

Because offsets deliver less-certain emission reductions, they should not be included in climate legislation. 

Nonetheless, if offsets are considered, the levels of the caps on pollution must be stringent enough – and the offsets limited enough – to minimize the impact that lower certainty emissions reductions have on our ability to achieve pollution-reduction targets. 

Offsets should be strictly limited to no more than 5 percent of the allowances, as proposed by Representatives Dingell and Boucher in the early years of the offset program in their draft climate bill.  Unlike in their bill, however, this percentage should not increase over time unless and until offsets can be proven to deliver equivalent emission reductions to actions taken within the bounds of a cap-and-trade program.

To provide the highest quality offsets possible, Congress should require EPA to consult an independent Science Advisory Board in establishing and periodically reviewing domestic and international offset programs.

In addition, due to the inherent problems in determining additionality, Congress should discount offset credits.

Finally, if international offsets are permitted, national-level accounting and administrative methods should be required.  And, there should be some conditionality on their use to enable the program to serve as a lever to encourage developing countries to substantially reduce their emissions below business as usual.

In conclusion, the central objective of U.S. climate policy must be to reduce global warming emissions fast enough to avoid dangerous impacts.

Because offsets provide less-certain reductions in emissions, they would jeopardize our ability to achieve pollution-reduction targets and should not be included in climate legislation.

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Ms. Figdor's full written testimony is available on the House website [pdf].