Detailed Summary of the S. 2729 Clean Energy Partnerships Act of 2009

This document provides a detailed summary of the greenhouse gas (GHG) offset provisions in the Clean Energy Partnerships Act of 2009 (S.2729), which was introduced as a bill by Senators Stabenow, Baucus, Klobuchar, Brown, Begich and Harkin on November 5, 2009.

(This summary applies only to the Clean Energy Partnerships Act as introduced, and not previous or subsequent iterations.)

Offsets

• Program administration: The Secretary of Agriculture (Secretary) and the Administrator of the Environmental Protection Agency (Administrator) shall promulgate regulations establishing a program for the issuance of offset credits from uncapped domestic sources and sinks. The Department of Agriculture is designated lead agency for the implementation of determination of eligible offset project types (Sec. 104, pg. 16), requirements for offset projects (Sec.105. pg. 23), approval (Sec. 106, pg. 32), and audits and review (Sec. 109, pg. 39) for domestic agriculture and forestry projects (Sec. 103, pg. 14).

  • Program establishment: Not more than 1 year after date of enactment, the Secretary and Administrator shall promulgate regulations establishing a program for the issuance of offsets. Directs the Administrator, in consultation with relevant federal agencies, to establish an offset registry (Sec. 103, pg. 14).
  • Eligible project types: Includes an initial “per se” list of 15 eligible project types (Sec. 104, pg. 16). The Secretary or the Administrator may by rule add to or remove from the list a specific project type. Any person may petition to add a project type to the list (Sec. 104, pg. 21).
  • Advisement: The Secretary and the Administrator shall establish the “Greenhouse Gas Emission Reduction and Sequestration Advisory Committee” to provide scientific and technical advice on the establishment and implementation of offset programs. The Committee shall periodically submit reports with recommendations regarding the list of eligible offset projects and assess the integrity of the emissions reductions that occurred from those projects (Sec. 102, pg. 3).
  • Program review: The program will be reviewed at least once every 5 years (Sec. 111, pg. 47).

• Use of Offset Credits for Compliance Purposes: The Administrator shall promulgate regulations for entities covered under the cap who wish to satisfy their allowance submission requirements with offset credits issued under this part (Sec. 113, pg. 48).

• Additional Regulatory Standards:

  • Entities using gas from domestic methane projects as an energy source are not required to hold allowances or credits for the resulting emissions (Sec. 112, pg. 48).
  • Prohibits other Federal laws from regulating greenhouse gases that are regulated under the domestic offset credit program in this amendment (Sec. 112, pg. 48).

• Additionality: The “appropriate official”¹ shall establish a standardized methodology for determining the additionality of each type of offset project listed as eligible. Such methodology shall assure, at a minimum, that any GHG emission reduction, avoidance or sequestration is considered additional only to the extent that the project or activity:

  • was not required by law;
  • was not commenced prior to January 1, 2009 (except for projects that commenced after January 1, 2001, that were registered as of the date of enactment under an offset program that the Administrator and the Secretary have approved under the early offset provisions under Sec. 110);
  • exceeds a conservative estimate of business-as-usual performance or practices for the relevant types of activity, as defined by a standardized activity baseline established by rulemaking by the Secretary (Sec. 105, pg. 23).

• Quantification and leakage: Directs the appropriate official to establish a standardized methodology for addressing quantification of emission reductions from offset projects and for accounting for and mitigating any potential leakage and uncertainty of emissions (Sec. 105, pg. 24).

• Accounting for Reversals²:

  • General Provisions: Requires reporting of any reversal or release of stored carbon receiving GHG offset credit. The appropriate official shall prescribe at least one of the following: an offset reserve, insurance or another mechanism to address reversals. Credits will be placed in the reserve based on the risk of reversal and shall be subtracted from the quantity of offset credits to be issued. In the event of a reversal, the appropriate official shall remove and cancel credits or allowances to fully account for the reversal. (Sec. 105, pg. 25)
    • Intentional reversals: offset project developers shall replace 150 percent of cancelled credits.
  • Carbon agreements and land use flexibility: Allows the use of carbon agreements and land use flexibility mechanisms to address reversals from sequestration projects including: establishing a specific duration for the activity, clear liability for carbon accounting, sequential activities, adequate monitoring and accounting systems, carbon easements and other options as determined by the Secretary (Sec. 105, pg. 25). The Secretary may assign liability for reversals to any part of the carbon agreement for the purposes of carbon accounting. (Sec. 105, pg. 29)
  • Crediting periods: 5-10 years for projects other than forestry projects; no more than 30 years for forestry projects. The representative of an offset project may petition for a new crediting period to commence after the end of the previous crediting period (Sec. 105, pg. 29).
  • Emission reduction integrity: The appropriate official shall apply conservative assumptions to protect the environmental integrity of the cap (Sec. 105, pg. 31).
  • Additional Benefits and Data Collection: nothing in this section precludes an offset project from receiving offset credit because of receipt of payment from another source for an ecological service other than GHG emission reductions. The appropriate official shall collect such data as are necessary to assess a range of factors relative to the performance of any offset project. (Sec. 105, pg. 31)

• Offset approval, verification, issuance, and auditing requirements: Establishes approval process for offsets credits (Sec. 106, pg. 32) and verification guidelines requiring third party verification of projects by verifiers accredited by the appropriate officials³ (Sec. 107, pg. 35). The appropriate official⁴ shall conduct random audits of offset projects and credits on an ongoing basis. May delegate audit responsibility to states (Sec. 109, pg. 39).

• Early offset supply: One offset credit shall be issued for each ton of CO2e registered under an Administrator-approved regulatory or voluntary program established before Jan. 1, 2009, as long as the program: 1) was started after Jan. 1, 2009; 2) developed methodologies through a public consultation or peer-review process; 3) made publicly available the standards, methodologies and protocols of the program; 4) requires verification of all emission reductions by a state regulatory body or accredited third party verifier; 5) requires registration of all credits issued in a publicly accessible registry with individual serial numbers for each ton; 6) ensures no credits are issued for projects that were funded or solicited by the program administrator. The Administrator may revoke approval of a program if the above criteria are not met, or can prohibit a particular project type if it fails to ensure credits will only be issued for emission reductions that are measurable, additional, verifiable, and enforceable (Sec. 110, pg. 40).

  • Credit issuance. Offset credits shall be approved that were issued by qualified programs from projects started after January 1, 2001 and before the date on which the regulations for offset methodologies promulgated under this title take effect. Crediting period will not exceed the shorter of 10 years or the established crediting period for the project by the approved program. (Sec. 110, pg. 43).
  • Ineligible credits. Emission reductions that occurred prior to January 1, 2009 and were rewarded payments pursuant to the authority of the Secretary under the carbon conservation program under title II of this act. Retired and expired credits are not eligible. (Sec. 110, pg. 43)
  • International reduced deforestation projects. International reduced deforestation projects can generate early offset credits if the project started between the period of Jan. 1, 2001 and no later than 2 years after the enactment of this legislation and is registered with a regulatory or voluntary offset program that the Administrator determines: 1) meets the requirements of the early offset program; 2) issued credits from a program established under state law or designated by a State as an offset registry prior to Jan. 1, 2009; and 3) is consistent with policies established under federal laws enacted to regulate emissions to protect the rights and interest of local communities and forest ecosystems. Credits may be issued starting on January 1, 2009. For counties whose emissions account for less than 1 percent of global greenhouse gas emissions and less than 3 percent of global forest sector and land use change emissions, credits may be issued until one year after the effective date of regulations promulgated under this act. For all other countries credits may be issued starting on January 1, 2009 until 2 years after the date of enactment of this act (Sec. 110, pg. 45).

Other Non-Offset Related Programs

• Carbon Conservation Program:

  • Program establishment: The Secretaries of Agriculture and Interior shall establish a Carbon Conservation Program with incentives for land owners and grazing contract holders to promote greenhouse gas emissions reduction or carbon sequestration activities, with forest related components carried out by the Chief of the Forest Service (Sec. 202, pg. 49).
  • Purposes: Recognize early action and ensure the continuation of sequestration practices by early adopters, support the development of new methodologies, improve management practices of agriculture land, grass land and forest land to increase carbon sequestration, avoid conversion of land that would result in an increase in GHG emissions, encourage management practices that would lead to increased sequestration on Federal and private land.
  • Funding: Establishes a Carbon Conservation Fund for this program in the Treasury, all amounts of which shall be available without further appropriations or fiscal year limitations (Sec. 203, pg. 59).
  • Methods: Projects that qualify for funding through this program can receive it through multiple mechanisms, including: conservation easements and sequestration contracts, timber harvesting or land grazing contracts, or through a combination of these methods. At least 30 percent of the funding for each fiscal year must go to conservation easements. Emission reductions carried out through these projects may not be counted as carbon offsets unless any agreement or contract entered into under this program has expired, the activity continues and it meets the criteria laid out in the domestic offset credit program in this amendment (Sec. 202, pg. 51).
  • Measurement and program review: The Secretaries of Agriculture and Interior shall submit annual reports to the Administrator and conduct a programmatic review no later than 5 years after enactment of this legislation and every 5 years thereafter (Sec. 202, pg. 56).

• Rural Clean Energy Resources

  • Establishes a Rural Clean Energy Resources Fund in the Treasury for Title III and IV of this amendment to carry out the Rural Energy for America Program under section 9007 of the Farm Security and Rural Investment Act of 2002. Not less than 20 percent of the funds provided must be used for grants to bio-refineries and 60 percent to provide loans (Sec. 304, pg. 62, Sec. 305, pg. 63 and Sec. 302, pg. 61).
  • Amends the Farm Security and Rural Investment Act of 2002 to define an entity eligible to receive assistance through the Rural Clean Energy Resources Fund (Sec. 303, pg. 61).

• Research and Demonstration Program: The Secretary shall use an appropriate amount of funds from the Rural Clean Energy Resources Fund to carry out research and demonstration activities in regards to 1) approaches to sequester carbon; 2) methane emission reduction associated with agricultural production; 3) nitrous oxide emission reductions associated with agricultural production; 4) adaptation of agriculture and forestry practices to the effects of global warming; 5) soil carbon sequestration approaches such as biochar; 6) approaches to help specialty crops produce reduce greenhouse gas emissions; and 7) measures to reduce uncertainty in estimating greenhouse gas emissions from carbon sequestration (Sec 402, pg. 64).

Thanks to Alex Grais of WRI for his drafting assistance.