A Good Idea, Given a Few Basic Reforms

• Author: Marty Spitzer
• Position: Legislative Director at the Center for Clean Air Policy
• Pages: 52-52

Page 52 ❧ THE ENVIRONMENTAL FORUM Copyright © 2010, Environmental Law Institute®, Washington, D.C. www.eli.org.

Reprinted by permission from The Environmental Forum®, May/June 2010

Th e fo r u m

A Good Idea,

Given a Few

Basic Reforms

M S

It is time again to debate the role

of international of‌fsets. Much

has changed since the U.N.

adopted the Clean Develop-

ment Mechanism as part of the

Kyoto Protocol, allowing developing

countries to sell of‌fsets to developed

countries. e CDM has been bene-

f‌icial to both poor and rich countries

by bringing f‌inancing to the former

and helping to reduce compliance

costs for the latter.

Today our goals have changed and

international of‌fsets policy must also

change. While we still need to lower

our compliance costs by purchasing

of‌fsets from developing countries, to

avoid a 2°C rise in global tempera-

tures we must also reduce our own

emissions and simultaneously accel-

erate the pace at which major devel-

oping countries reduce theirs.

e oft-heard rhetoric in Wash-

ington and among businesses —

that the United States needs a large

pool of of‌fsets to lower costs and

should not act before China and

India — may feel good but creates

a dilemma. If we continue paying

developing countries to reduce emis-

sions to meet our own reduction

goals, what incentive will they have

to undertake and f‌inance their own

emissions reductions? Moreover, our

energy-intensive and trade-sensitive

industries (e.g., steel) should also be

concerned with current of‌fsets policy

because their competitors in devel-

oping countries prof‌it from selling

credits to us.

Large developing countries are

also beginning to see a problem with

the current CDM. Countries like

China know they must eventually

reduce their absolute emissions, but

worry that selling us their lowest cost

reductions will leave them paying for

more expensive ones.

So what should of‌fsets policy look

like? First, it should build on agree-

ments by developing and developed

countries in the international nego-

tiations. Developing countries have

now agreed they will reduce their

emissions in exchange for f‌inancial

and technological assistance from the

developed countries. Of‌fsets could

only be earned for emissions reduc-

tions that go beyond these commit-

ments.

Another important reform would

move away from the current project-

by-project CDM, where it is pos-

sible for some f‌irms to reduce their

emissions and sell of‌fsets even as net

emissions from their sector increase.

Instead, sectoral crediting allows

of‌fsets to be sold only after emissions

are reduced for the entire sector (e.g.,

steel again), fostering environmental

integrity and protecting U.S. jobs.

On deforestation, we need

a staged approach. Developing

countries should f‌irst prove their

readiness and capacity to measure,

report, and verify reductions before

receiving credits. Government-to-

government funding should also

be made available to build capacity

and to purchase of‌fsets before they

are completely market ready. e

House-passed Waxman-Markey bill

includes both approaches.

Ultimately, of‌fsets should be part

of the climate solution as long as

they ref‌lect real reductions in emis-

sions and do not undermine global

emissions reductions — including

required reductions from developing

countries — necessary to ward of‌f

the worst impacts of climate change.

If we build on the emerging inter-

national framework and contribute

our fair share of f‌inancing to help

developing countries meet their

commitments, we will foster a robust

of‌fsets program that will help meet

the climate challenge at the lowest

possible cost.

Marty Spitzer is the Legislative Director at

the Center for Clean Air Policy.

We’ve Been

Looking for

a Free Lunch

M T

There’s little question that

of‌fsets can be an important

component of climate

change strategy, primar-

ily because of their ability

to moderate near-term mitigation

costs. Today’s ruckus is not really

about whether of‌fsets can contribute

to mitigation, however; it’s about

how they’ve performed to date, and

how to integrate of‌fsets into legisla-

tion. But carbon markets are not an

end in and of themselves. Stakehold-

ers need to be conf‌ident that of‌fsets

are actually contributing to mitiga-

tion.

Any ef‌fective of‌fset strategy re-

quires balancing two objectives:

lower cost compliance and environ-

mental rigor. Too much focus on

costs, and rigor goes out the window

(because too many reductions are

credited as of‌fsets). Too narrow a

focus on rigor, and costs go sky-high

(because too many real of‌fsets are

excluded from the of‌fset pool). In

looking for the perfect rules that let

in all the low-cost real of‌fsets but

none of the impostors, we’re dream-

ing an impossible dream. It’s crucial

that policymakers def‌ine a politically

acceptable balance between these

two objectives.

e key analytical issue here is

“additionality,” perhaps the most

misused and misunderstood word

in climate change mitigation. In a

regulated market an of‌fset ton al-

lows another ton to be emitted from

a source that otherwise would have

been capped. To keep net emis-

sions from exceeding the cap, of‌fsets

brought into the system have to be

additional. Being additional means

that the reductions are attributable

to the existence of a carbon of‌fset

market (since if they’re not the re-