The one simple change that could vastly improve Waxman-Markey: Sunset the rip-offsets

Certainly the weakest part of Waxman-Markey is the 2 billion rip-offsets that polluters are allowed to purchase each year in place of reducing their own greenhouse gas emissions.  After all, total U.S. GHGs in 2005 were about 7.2 billion tons (see “Bush policies cause U.S. GHG emissions to soar 1.4% in 2007“).

Rip-offsets deserve to be called rip-offsets because it is far from clear how many of them represent real reductions (see discussion at “NRDC and EDF endorse the weak, coal-friendly, rip-offset-heavy USCAP climate plan” and below).

The good news in Waxman-Markey is you apparently have to purchase 5 tons of offsets to substitute for 4 tons of actual emissions reductions and you can’t get international offsets from a country that has not agreed to reduce its emissions “” which together are vast improvements over the USCAP proposal.  Also, Waxman-Markey would in theory let EPA set tough standards for domestic rip-offsets.  How tough those would be in practice is anyone guess.

Certainly 2 billion is way too many, but rather than trying to rewrite the bill to sharply reduce those in the early years, which seems unlikely to be a successful negotiating strategy, I’d just suggest that progressives in Congress (and elsewhere), push to sunset the offsets.

After all, two main purposes of the rip-offsets are to:

  1. Give polluters some alternatives to reducing their own pollution while they are actively developing and deploying alternatives, and
  2. Give credits for difficult-to-quantify (but presumably real and cheaper) GHG emissions reductions while the government is actively developing protocols to bring the offsets under the cap.

Now if you don’t motivate polluters to change, you end up with the inaction of the coal industry — as typified by Jim Rogers in his interview on 60 Minutes this Sunday.

A decade ago the coal industry said “don’t regulate us, give us a decade to develop sequestration and other clean technologies.”  Well, they never seriously invested in sequestration and they refuse to adopt the many clean technologies that have been developed, as Rogers made crystal clear [see “Like Detroit, the coal industry chooses (assisted) suicide” and Bush wanted to destroy the future of coal as much as the industry did, Futuregen was “nothing more than a public relations ploy,” House study finds].

Now I see two basic sunset strategies.

The one I’d recommend is to sunset the offsets by 2030 with a steady decrease starting in 2012, allowing, say, 1 billion in 2020.  Another possibility that is weaker but probably more politically palatable is to apply the same reduction to the offsets that you are applying to emissions in the bill:

  • a 20 percent cut by 2020 (to 1.6 billion)
  • a 42 percent reduction by 2030 (to 1.16 billion)
  • an 83% cut in 2050 (to 0.34)

This, with the emissions targets in the bill, sends a strong signal that business as usual is over.  And I’d keep the 5 for 4 exchange ratio.  And I still certainly wouldn’t let any country without a cap have access to the international offsets, particularly China — with the one exception being certified, national accounting-based strategies to reduce deforestation.

Since I haven’t seriously dissed rip-offsets in over three months, let me repeat once more, as a major 2008 analysis from Stanford found

“¦ “between a third and two thirds” of emission offsets under the Clean Development Mechanism (CDM) “” set up under the Kyoto treaty to encourage emissions reductions in developing nations “” do not represent actual emission cuts.

And this led to the study’s stark conclusion:

“¦ any offset market of sufficient scale to provide substantial cost-control for a cap-and-trade program will involve substantial issuance of credits that do not represent real emissions reductions.

The Government Accountability Office recently ripped rip-offsets: “The use of carbon offsets in a cap-and-trade system can undermine the system’s integrity.”

Also, the CDM is filled with fraud (see “You can call a rip-offset a CDM project, but it’s still a rip-offset“). Let’s remember that the West got suckered into giving China some $6 billion to destroy greenhouse gas refrigerants that probably cost Chinese companies $100 million to capture and destroy (for more details, see “Kyoto’s Great Carbon Offset Swindle“). Let’s remember that

U.N. regulators are also concerned that some independent auditors of these projects, who are responsible for vetting their environmental legitimacy, have been letting project developers push through ventures of questionable environmental value”¦.

In a presentation to U.N. officials last fall, the head of T¼v S¼d’s carbon business told U.N. officials that the quality of projects the auditors are receiving from carbon brokers is “going down,” according to the U.N. panel’s Mr. Schmidt, who was at the meeting”¦.

“There is a high incentive” for companies to put together environmentally questionable carbon-credit projects, “because there is a lot of money that can be earned,” he said. “People are getting more inventive, so it’s getting harder to detect the black sheep.”

Let’s remember that instead of using the money to fund the transition to a sustainable economy, the World Bank “has loaned $1.5 billion to fossil-fuel companies to make minor greenhouse-gas reductions,” and “then sells carbon credits for those reductions,” and “takes its 13 percent cut”?

Let’s remember that “The vast majority of schemes that sell carbon credits to offset pollution are delivering 30% less than they promise“?

Now, the EPA can you probably weed out the worst of the domestic rip-offsets (as long as the agency is run by people who actually care about science and averting catastrophic climate impacts).  And for now, Waxman-Markey doesn’t buy into CDM.

So if we were to combine those Waxman-Markey offset provisions with sunsetting, then the bill would be much more palatable.

And, besides, aren’t sunsets beautiful?

UPDATE: Victor Flatt, Professor of Environmental Law, University of Houston Law Center, has an important related post: “Proposed Amendments to Waxman-Markey Could Diminish Integrity of Offset Provisions.”

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3 Responses to The one simple change that could vastly improve Waxman-Markey: Sunset the rip-offsets

  1. Hmm.. So again we are building a commercial market based on a false premise.

    Where have I heard of this before? Sounds like a bubble.

    Where is the market when CO2 levels continue to rise? Burst bubble.

  2. The problem with allowing rip-offsets from the start (even if you sunset them), is that you establish a whole new sector of rent-seeking industry players who will come to depend on the offset revenue streams for the livelihood and profits. Try taking that away in the future and you will have a problem. Same goes with giving free allowances away from the start. You are sure to have a fight on your hands in the future when free allowances and/or offsets sunset. Those rent seeking industries will be right back in front of Congress asking for “just a little more time for the transition” etc.

    Better to just limit the up front cost impacts in the first place with transparent cost containment, have no spurious carbon offsets or free polluter handouts, and reinvest almost all of the revenue to spur clean energy innovation and rapid deployment of clean and efficient energy technologies and critical enabling infrastructure (picking up where the carbon price necessarily leaves off). Instead of creating rent-seeking industries among old, pollution-economy industries and peddlers of rip-offsets who will do everything they can to delay strengthening of the bill in the future (even if it’s scheduled in the legislation), this approach would spur the birth and growth of larger and ever-more-influential clean energy industries that can actually help you lobby for the strengthening of the clean energy/climate legislation in the future. That’s the right kind of compromise, but not the one Congress is heading towards now…

    [JR: As a long-standing opponent of offsets, I could not disagree more with you. First off, the rest of the world really likes offsets, and view them as an important way of us integrating with them.

    Second, you Breakthrough Institute folks supposedly believe the Chinese and other developing countries would never raise carbon prices, but somehow that tens of billions of dollars a year will be spent on Greening up their economies. That requires offsets — at least if one buys into your worldview which I don’t.

    Third, “rent-seeking industries” — that is a standard right wing talking point. In fact, the reason we are creating a carbon market is to create carbon-reducing industries. Again, I don’t like offsets, but arguments make no sense and are internally inconsistent.]

  3. Payal Parekh says:

    The draft bill does not state that international credits can only be purchased from a country that has agreed to reduce its own emissions. The only requirements (found on page 424) is that the country, where the offset project takes place, and the US are party to a bi- or multilateral agreement concerning offsets and the country is a developing country.

    The bill also does not rule out offsets from the CDM entering the US system. On page 429, “offset credits that are issued by an international body established pursuant to the United Nations Framework Convention on Climate Change, to a protocol to such Convention, or to a treaty that succeeds such Convention” will be accepted if the offset credits meet the standard that the US plans to set (which is largely based on the structure of the CDM).