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Inside WCI
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Inside WCI: Offsets
This is the fifth in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative -- the West's regional cap-and-trade system.
“Offsets” are surely one of the most contentious issues in cap and trade. That's because they could improve the cost-effectiveness of cap and trade while bringing substantial side-benefits for free. Or they could also gut cap and trade, making it a sham. The devil is in the details.
Offsets are reductions in emissions that are legally or geographically outside the cap but that are honored like carbon allowances under the cap. For example, an electric utility in the Northwest might buy a 1-ton carbon offset -- for one ton of CO2 removed permanently from the atmosphere -- from a Northwest forest land owner who put a legally binding (and permanent) conservation easement on her land and thereby soaked up and sequestered, or stored, 1 ton of CO2. Alternatively, an oil company in the Northwest might buy 100 offsets from a coal-fired power plant in China that shut down one of its generators and replace the power through conservation programs. To use the offsets under cap and trade, the electric utility or oil company would present public officials with documentation of the offsets as a substitute for an equal number of carbon allowances.
WCI’s July 2008 draft proposal contemplates allowing companies to include up to 10 percent offsets in their portfolios of carbon allowances. That means that they could use offsets to achieve two-thirds of WCI’s 2020 reduction goal of 15 percent.
We think 10 percent is too much, especially when the entire goal is only 15 percent. Here's why.
