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How Realistic Are Expectations for the Role of Greenhouse Gas Offsets in U.S. Climate Policy?

A sound understanding of the economics
of offsets-in particular, of the potential
supply of offsets under future policy
scenarios and market conditions-is
critically important for policymakers
as they address major design decisions
in crafting climate policy. This analysis
will evaluate offset supply analyses
completed to date, with a particular focus
on identification of the assumptions and
discrepancies of these efforts. This work
will inform a subsequent, detailed analysis
of domestic offset supply potential.

Executive Summary

A sound understanding of the economics of offsets – in particular, of the potential supply of offsets under future market conditions – is critically important for policymakers as they address major design decisions in crafting climate policy. The World Resources Institute, in conjunction with the Stockholm Environmental Institute (SEI), is conducting a study to examine potential supplies of GHG offsets in a domestic cap and trade system.

This analysis will first identify key findings and clarify some of the assumptions, discrepancies, and shortcomings of the various efforts to quantify potential offset supply completed to date. Based on that analysis, the WRI-SEI study will summarize existing data on the potential volume of GHG reductions that could be achieved from these sources, and present cost curves for those reductions taking into account various assumptions about key offset policy design decisions.

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