How I learned to stop worrying and love Waxman-Markey, Part 2: In praise of domestic offsets

The two biggest concerns about domestic offsets in climate legislation — the possibility they will be riddled with fraud and/or that they will overwhelm the “genuine” emissions reductions — are I think, largely unwarranted.  The fact that Waxman-Markey potentially allows a substantial amount of domestic offsets is no reason whatsoever oppose it. readers know, I do not like rip-offsets.  I do not like them in DC.  I do not like them in Chicago.

I would not like them here or there. I would not like them anywhere.  And, yes, I have a 2-year-old daughter who likes Dr. Seuss.

But, seriously, there are two fundamental reasons I urge people not to buy offsets:

  1. The market is unregulated, so you have no idea what you are buying. And most every time the media — or I — look into a specific offset, it turns out to be a project that would’ve happened anyway or, worse, had already been up and running for years.  In short, your money is unlikely to be bringing about new emissions reductions.  Thus you aren’t “offsetting” anything.
  2. This country has no cap on emissions.  Therefore, offsets don’t add up to anything. They don’t assuredly take you off the business-as-usual emissions path.  It is wonderful to promote new wind projects — although the vast majority of wind-related offsets probably don’t do that (see “Schendler Part II: Good RECs vs. Bad RECs“) — but absent a cap on emissions, that project doesn’t necessarily actually lead to any net emissions reductions.

If, however, we passed comprehensive energy and climate legislation like Waxman-Markey, we would immediately solve both of those problems.  Yes, on paper, Waxman-Markey allows polluters to purchase some 1 billion tons of domestic offsets (see bill summary here), which is nearly 15% of total U.S. emissions.  And that seems like it would vitiate the near-term target of a 20% emissions cut in 2020.

But the EPA, in its preliminary modeling of the bill (here), finds that only a small fraction of that billion tons of domestic offsets would in fact ever be used, as this figure shows:

Note how few offsets come from actual direct emissions of greenhouse gases.  That’s because 85% of all emissions are directly regulated by 2020 under Waxman-Markey.  And many if not most of the emissions that aren’t directly regulated aren’t regulated because they are too small and/or disbursed to easily regulate, which is precisely why they are challenging offset candidates.

That said, CH4 and N2O reductions at, say, a medium-sized wastewater utility plant are an easy to identify and certify offset, as my wife, who works in the industry, always reminds me.  After all, wastewater utilities aren’t going anywhere (except the ones forced to move by sea level rise).  All that is required is for EPA to come up with a rigorous protocol for wastewater utility offsets, pre-certifying major contractors capable of constructing those offset projects, and then having some independent auditing firms confirm that project was put in place.

Such reductions/offsets are more than just genuine reductions in U.S. greenhouse gas emissions.  Remember, Waxman-Markey requires that you purchase five such offsets for every four tons of allowances you need.  So such offsets projects are, in fact an eminently reasonable way to address the GHGs that are not directly regulated.

And yes, I am a tad worried about all of the forestry offsets from 2030 on.  The EPA will need to come up with a rigorous protocol for such projects.  But the reason I’m not more worried is that it is hard to quickly generate hundreds of millions of metric tons of offsets from forestry, so EPA will have time to get this right.  Also, it is  not terribly hard to use satellite-based monitoring to determine if, on net, the United States is adding trees or cutting them down.  Indeed, that is precisely why we need to move away from project-based forest management to national-accounting-based forest management — you don’t want to pay someone to plant 1000 acres in one place and then have them cut down 2000 acres in some other place.  And after all, if the United Nations can adopt that approach for poorer countries, with its Reducing Emissions from Deforestation in Developing countries (REDD) effort, then so the United States can certainly do so for its own forest management and afforestation efforts.

I will like offsets here and there — as long as they are regulated by the EPA, and we have a (shrinking) emissions cap.

Bottom line:  The two biggest concerns about domestic offsets — the possibility they will be riddled with fraud and/or that they overwhelm the “genuine” emissions reductions — are I think, largely unwarranted.  The fact that Waxman-Markey potentially allows a substantial amount of domestic offsets is no reason whatsoever oppose it.

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10 Responses to How I learned to stop worrying and love Waxman-Markey, Part 2: In praise of domestic offsets

  1. paulm says:

    So people do realize they have to change their life style and sacrifice some things.

    Belgian city plans ‘veggie’ days
    The Belgian city of Ghent is about to become the first in the world to go vegetarian at least once a week.

  2. paulm says:

    Smoking has been banned in Public in Vancouver for health reasons.

    I wounder if there will be restrictions on meat consumption for this very reason some time in the future?

  3. Mark Shapiro says:

    It’s what I imagine every CEO saying after someone finally convinces him to try energy efficiency (or other profitable clean energy):

    “Thank you! Thank you, Sam-I-am!”

  4. oxnardprof says:

    I wonder if programs to encourage economical driving habits would qualify for offsets? Most drivers (LA area, I assume everywhere) drive above the 65 mph speed limit. The much-maligned 55 mph speed limit of the seventies was enacted then to conserve gasoline. Most drivers who speed feel they have to get from point a to point b quickly, their lives are too busy, etc. However, I bet careful study would show that most trips are short enough so that the time ‘lost’ by driving more slowly would be insignificant. I guess I do not have to tout the value of conserving gasoline here.

    So my question is can effective public / private programs to conserve gasoline fuel be used as an offset activity?

    Is there any possibility that the emissions from air travel can be reduced in a significant way? I am hesitant to buy offsets to ease my conscience for air travel precisely because I am not confident that such offsets will realy result in reduced carbon in the atmosphere.

    Despite all that I am encouraged by the analysis of W-M, that it may move us in a good direction.

  5. John Hollenberg says:

    I have changed my driving habits to 55 MPH on L.A. freeways, and on surface streets drive so as to minimize any braking. My 22 mile drive (each way) takes an extra 4-5 minutes, an amount that is sometimes dwarfed by nasty traffic delays. Driving this way, I have measured mileage to be greater than even the overly optimistic EPA estimates for my 2002 car. Next step for me is to purchase the third generation Prius as soon as it is released in the U.S. An electric car would be ideal for my commute, but don’t know how soon they will be available at a reasonable price.

    Probably won’t ever make it politically, but a lot of lives and CO2 emissions could be saved by ratcheting the speed limit down to 55.

  6. John H says:

    To Oxnard prof: Programs to encourage efficient driving will almost surely not count as offsets. The rise in gasoline prices (modest as it may be) resulting from the cap will give drivers a big incentive to cut back.

    It may not give them as big an incentive as needed to do something reasonable (I presume) like drive more slowly, but the cap itself will get us the reduction in fossil fuel use that we need.

    Therefore, no fossi-fuel reducing offset projects are likely to qualify.

  7. Ric Merritt says:

    Dictation software strikes again: “disbursed” should be “dispersed”.

  8. Good try, but I am not confident that the offset trading will turn out any better than the last junk market experiment, the one based on mortgage-backed securities. How can we be sure the offsets are real, when they are mainly in trees alleged to be thriving somewhere. The potential for fraud and abuse in origination, as there was for the NINJA borrowers, will still be there.

    Rating agencies? Government inspection? Conspicuous failures. And then wait until the Wall Street swindlers start working their incomprehensible math to package risk out of these phantom trees. Yet more potential for abuse. All in the name of saving the planet.

  9. danl says:

    Joe, I’m not convinced about your forests argument. Having looked into it, carbon storage by different kinds of trees is tremendously hard to estimate, with an error of (+/- 100%). Furthermore, several reports by environmental groups (such as GreenPeace) argue that REDD credits would flood the post-Kyoto market, depressing the price by up to 75% due to the mismatch of supply and demand. Of course, all energy-based offset projects would soon be abandoned.

    In my opinion, there should be a separate, non-market fund for de/re/a-forrestation projects, especially in the developing world. It’s a huge issue, but not one that is suited for cap and trade to handle.

  10. C. Vink says:

    Greenpeace: ‘US climate bill weakens’
    (press release May 14, 2009: )

    A piece of legislation that started out as a real opportunity for the US to combat climate change has been co-opted by special interests and now threatens to do more harm than good. The Waxman- Markey bill is set to go before the House Energy and Commerce Committee on Monday and could remove the ability of the US to commit to real action on climate change at the UN climate summit in Copenhagen in December.

    According to reports, the 600-page draft bill on energy and climate originally aimed at providing solutions to climate change – including a plan to cap and reduce greenhouse-gas emissions in the US – has become significantly weaker over the past week and is no longer strong enough to help the US do its part to combat climate change.