March 6th, 2009 by Jess

The Subcommittee on Energy and Environment (part of the House Committee on Energy and Commerce) met yesterday to discuss the role of carbon offsets in climate energy policy.

By way of background, carbon offsets allow industries in developed nations under a cap and trade system to meet their cap requirement by funding emissions reductions projects in developing countries.  This system, operating through the Kyoto Protocol’s Clean Development Mechanism (CDM), has been in effect since 2002.

The premise of CDMs specifically, as well as carbon offsets more generally, is that it is often cheaper to pay for carbon reduction projects elsewhere than it is to reduce emissions in already developed countries.  For example, there are many companies in the U.S. which allow consumers to opt into a voluntary carbon market, offsetting their estimated emissions from their home and personal vehicle.  These companies are not directly removing your personal emissions from the atmosphere.  Rather, they are putting your money towards carbon reduction projects such as reforestation and funding for alternative energy.  CDMs are like putting that little green sticker on your car, but for industries that must meet their carbon caps, rather than individual consumers.

Recently, the role of carbon offsets in a cap and trade system has been criticized by environmentalists and politicians alike due to the apparent failure of offsets in the European cap and trade system.  Indeed, in spite of the cap and trade program, scientists have not found a measurable reduction in CO2 emissions, an issue which is in part attributed to ineffectual carbon offsets.  Therefore, the potential role of carbon offsets in designing a U.S. cap and trade system is a key issue of debate for our policymakers.  There is already some debate as to whether the economic cost of fighting climate change is worth it.  The last thing we want to do is to design another expensive system that doesn’t work.

The Subcommittee put together an impressive and well-balanced collection of panelists for this hearing:

John Stephenson, Director, Natural Resources and Environment, Government Accountability Office
Gary Gero, President, Climate Action Reserve
Emily Figdor, Federal Global Warming Program Director, Environment America
Graeme Martin, Manager of Business Development, Environmental Products, Shell Energy North America
Hon. Stuart Eizenstat, on behalf of the Forest Carbon Dialogue
Michael Wara, Ph.D., Assistant Professor, Stanford Law School

Thankfully, unlike the last congressional hearing on climate change covered on this blog, the three panelists agreed that the issue at hand merits the attention of Congress.  I still think it is sad that I had to be excited about that.

If there was an consensus from the hearing yesterday about the role of offsets in future climate change policy (as much as any consensus can be reached in Congress), it was that carbon offsets must be real, permanent, quantifiable, verifiable and additional.

Of these, the most difficult criteria to ensure is additional.  In order to be additional, the carbon offset must ensure that emissions reductions are made that would not otherwise have been made in a business as usual (BAU) situation.  So, theoretically, one would need to show that 1) the project would not have happened without the offset funding, 2) the project does actually reduce emissions, and 3) X amount of emissions would have occurred without the project.  That is easier said than done.

Ambassador Stuart Eizenstat made a particularly salient point about additionality.  As he attended the hearing on behalf of the Forest Carbon Dialogue, his testimony was focused on the effects that deforestation has on climate change.  Eizenstat’s response to Representative Fred Upton’s (R – MI) question about additionality was not particularly short, but I thought it was sweet!  Eizenstat pointed out that the incentives to cut down forests in developing countries are so enormous that, at this point, it is a foregone conclusion that they will be cut down.  There is no question that deforestation will continue unless the incentives are shifted in some way.  Carbon offsets could be part of that way.

Ah, they say, but just because the forests in the offset-protected area are not being cut down does not mean that more land is not being deforested in other areas as a result.  According to our panelists, the key to this question (verifiability and permanence on this one too!) is combining our satellite technology with a system of national baselines for forest coverage.  We have the technology in place to monitor deforestation on a global level.  Maybe it could be as useful for fighting climate change as it is for goofing off on Google Earth while we’re at our day jobs!

For the most part, this was a fascinating hearing that offered a fairly comprehensive discussion about the offset issue.  Over the next several months, many congressional committees are conducting hearings on all aspects of climate change policy.  I will be attempting to cover as many of them as possible.  However, our Congress has done a good job of making sure that these hearings are accessible to anyone with an internet connection.  If you are interested in the process of shaping climate change policy in the U.S., you might want to go check out the House and Senate committee websites.

Next week, I plan to have an update on the Ways & Means hearing on climate change and low-income families.