In the Chamber -- Grant Mitchell's Blog

Considering carbon offsets

Posted 10/5/2009 by Grant Mitchell

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There is much discussion and controversy in Washington's climate change debate about allowing polluters to buy offsets to meet their CO2 emissions target. The Waxman-Markey bill would allow the use of offsets to meet 27% of an emitter's target reductions in 2016 rising to 66% by 2050. The bill would allow 50% of these to be international. Boxer-Kerry legislation would reduce the reliance on international credits form what Waxman-Markey is proposing.

Offsets are accredited C02 reductions achieved by a non-capped (non- regulated) emitter which can be sold to a capped emitter. So, a coal-fired electric plant needing to reduce emissions by ,say, 10 units but only able to reduce 5 units through technology improvements, would be able to buy 5 units from, say, farmers who have really reduced C02 output or captured C02 due to altered farming practices. Alberta farmers are selling offsets now for under $10 per tonne.

The advantages of offsets are:

  1. They are a way for the market to develop the cheapest means of reducing emissions. There is a lot of "low hanging fruit" that emitters could fund with offset purchases as they work on better but more expensive technologies to reduce their emissions. The idea here is that early on there will be lots of ways to reduce emissions of CO2 that will be cheaper than the technology that might be required to significantly reduce, say, emissions from coal fired electric plants. But as time passes, there will be fewer cheap offsets reductions and the coal plant will start utilizing the more expensive technology to reduce their emissions.
  2. Farmers will be able to develop and sell offsets. So, there is a chance to provide some cash flow for farmers that is consistent and not related to the vagaries of farm commodity prices. There are 32 ways in which farmers can change crop growing and livestock management practices to capture and hold or prevent the emission of CO2 or methane gases. The bottom line is that farmers get some money and I have not met a single farmer who has too much money.

 

There are a variety of criticisms but there are answers:

  1. You cannot count on the validity of the offsets particularly international ones. Well, we buy stocks and bonds on international markets all the time and we have figured out ways to verify their values. There are many international standards and organizations that do this now and with credibility.

    One Democratic Representative that we met with made the point that most of the international offsets will be payments to keep areas of rain forest in South America from being cut down. Areas will be chosen and their continued existence can be monitored with satellites.

  2. International offsets will mean money is sent to other countries. First, those who argue this often also argue that climate change initiatives are too expensive. Well, offsets will find the cheapest way to reduce emissions and the bigger the geographic scope of these offsets the more the supply and the lower the price and the greater the availability of offsets. Second, we have to do something about climate change because to do nothing may be a terminal problem, literally, and so there may have to be some transfer of money to other countries for at least an interim, transitional period.

 I worry that these arguments against offsets will see them rejected as part of the solution. That will be a real shame because I think they will facilitate the quicker reduction of emissions and help farmers in the process. We will have to see how the politics of it works out in the US and what Canada does in turn and perhaps in response.

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