WRI Stories Feed: Emissions Markets

Offset Quality and the American Clean Energy and Security Act of 2009

Alexia Kelly — Tue, 21 Apr 2009 15:40:05 -0400

This summary applies only to the discussion draft released on 3/31/2009 and not subsequent iterations. Inquiries can be directed to Alexia Kelly.

For more information, visit the U.S. Federal Climate Policy home page.

The American Clean Energy and Security Act of 2009 (ACESA) provides a number of important provisions that will ensure that offsets used in the program represent real, additional, measurable and verified emission reductions. This document provides a brief overview of the most important of these. Offsets are used in lieu of reductions from sectors subject to mandatory emission reduction requirements, thus offset quality is of vital importance to the environmental integrity and credibility of a greenhouse gas reduction program. The ACESA lays a strong foundation for an offset program that will deliver high quality offset credits. Ensuring the integrity and quality of offset credits used in the system is crucial to the accomplishment of our domestic and global emission reduction goals.

The American Clean Energy and Security Act of 2009:

Establishes clear definitions of key quality criteria. This includes robust provisions to address additionality, leakage, impermanence, and uncertainty through standardized, transparent methodologies. These provisions will help provide assurance that offsets used in the program represent emission reduction projects that would not have happened in the absence of the offset market. (Sec. 734)
Keeps technical decisions with the Administrator. This includes the identification of eligible offset project types and the development of qualification and quantification methodologies and protocols. These provisions ensure that these critical design elements are crafted through a publicly-accessible rulemaking process guided by the U.S. Environmental Protection Agency (EPA) with input from scientists and technical experts. (Sec. 733)
Allows for program adaptation and flexibility over time. The bill allows for both the addition and removal of eligible offset project types over time. This is an important element of ensuring emission reduction or sequestration projects receiving offset credit are generating real, additional reductions of greenhouse gases beyond what otherwise would have occurred. The bill also calls for regular review and evaluation of the offset program. (Sec. 733 and 734)
Includes strong provisions to ensure offset credits sourced from sequestration projects deliver permanent reductions. The bill provides stringent provisions that include buffer accounts, discounting, clear assignment of liability and insurance mechanisms to ensure that emission are properly accounted for in the event of a sequestration project emission reduction reversal. (Sec. 734)
Establishes an Offsets Integrity and Advisory Board. The bill establishes an Offsets Integrity and Advisory Board tasked with providing scientific and technical guidance to EPA as it promulgates regulations and administers the program. Comprised largely of scientists, the Board will be an important resource of scientific and technical information for EPA. (Sec. 731)
Provides multiple mechanisms for engaging the international community through offsets. The bill allows EPA to employ both the approval of offset credits from international programs, as well as sector-based crediting mechanisms. Access to international offsets will be important to the U.S. to ensure both supply and liquidity of offsets in the system, particularly in the early years of the program. Allowing EPA the flexibility to implement circumstance-appropriate offset crediting mechanisms and approval processes will ensure the offset program has the flexibility to function effectively, while delivering real, verified and additional emission reductions. (Sec. 742)

Dear Climate Media: Don’t Forget the Midwest

Franz Litz — Wed, 11 Feb 2009 08:49:24 -0500

Midwestern governors deserve greater recognition for what they have done to implement a regional cap-and-trade program.

While it is true that states in the Northeast and the West have been leaders in tackling climate change through the design and implementation of mandatory caps on greenhouse gas emissions, the media too often leaves out a similar effort in America’s heartland.

It may be true, as Mr. Broder of the New York Times has suggested, that the Midwest brings specific and legitimate concerns to the debate on a national climate change policy. The suggestion, however, that the Midwest seeks to delay or otherwise weaken efforts to cap and reduce emissions nationwide is directly contradicted by the actions of the region’s governors.

Midwestern Greenhouse Gas Accord

Members:

Iowa
Illinois
Kansas
Manitoba
Michigan
Minnesota
Wisconsin

Observers:

Indiana
Ohio
Ontario
South Dakota

The governors of Illinois, Iowa, Kansas, Michigan, Minnesota and Wisconsin are nearing completion of a process started in November 2007 to design and implement a mandatory cap-and-trade program to reduce emissions across the Midwest.

The Midwestern Accord, like the Western Climate Initiative, is in development and will be operational by 2012. These two markets, along with the Northeast’s Regional Greenhouse Gas Initiative (RGGI), will cover over half the U.S. population.

WRI’s work with the states participating in the Midwestern Greenhouse Gas Reduction Accord has shown they are every bit as serious about reducing emissions as their northeastern and western counterparts.

They expect the introduction of a regional cap to spur energy innovation, create green jobs, and improve their states’ energy and economic security.

Congress can and should learn from these states.

Ten States Formally Begin Carbon Trading

Franz Litz — Wed, 24 Sep 2008 12:58:18 -0400

On Thursday, for the first time ever, the United States will see a price on carbon emerge from a mandatory emissions cap-and-trade program.

The auction this week is the first held by the Northeast Regional Greenhouse Gas Initiative (RGGI). RGGI caps carbon dioxide emissions from power plants in 10 Northeastern states to 188 million tons CO2 (171 million metric tons). Approximately 90% of the allowances are to be auctioned on a quarterly basis, and that percentage will likely increase over time. This large-scale auctioning of allowances is a first for U.S. cap-and-trade programs. WRI served in an advisory role to the states and stakeholders that designed the Regional Greenhouse Gas Initiative.

The price of an allowance in this first auction is expected to be under $5 a ton based on reported futures transactions. Notwithstanding the relatively low price, the RGGI auction marks an important milestone for U.S. climate action, as it is a significant step towards a national emissions program to fight global warming by trading carbon in a regulated market.

RGGI’s auctions are open to anyone who registers to participate in advance. The results of the bidding will be posted here.

This effort is being closely watched by two other regional initiatives. Along with RGGI, the Midwest Greenhouse Gas Reduction Accord (MGGRA) and the Western Climate Initiative (WCI) will eventually cover more than half the U.S. population with efforts to reduce carbon emissions. The four Canadian provinces participating in the Western Climate Initiative make up 80% of Canada’s population.

WCI released its program design recommendations this week. WRI continues to advise both the WCI and the MGGRA efforts.

RGGI offers a number of important lessons for the design of cap-and-trade programs beyond the use of auctioning. The program’s offsets component represents an alternative to the approach used under the international Clean Development Mechanism (CDM). RGGI establishes a “positive list” of eligible offset projects, including all requirements and methodologies. The approach is designed to remove much of the guess work that hampered the CDM process. Both the WCI and the MGGRA have largely adopted the RGGI offsets approach, and this bodes well for adoption on the national level in the U.S. and Canada.

A few problems have also come to light: most notably, the formula for setting the cap. The initial cap was set using a four-year old projection of emissions growth in the electricity sector for 2009. Actual emissions growth has been much lower, and now the initial cap is more than 5% above what the industry is currently emitting. Adjustments to the cap are being considered, but any such adjustments would require full regulatory approval. Hopefully this flaw can be avoided in future market designs.

WRI will continue to watch the progress of RGGI during its first year, and bring those lessons to other regions and to the discussions of cap-and-trade in Washington, D.C. and elsewhere in the world.

MEDIA ADVISORY: Lunch Panel to Discuss Climate and Trade Links

Paul Mackie — Mon, 19 May 2008 10:55:42 -0400

WHAT: The World Resources Institute and the Peterson Institute for International Economics will hold a briefing to release Leveling the Carbon Playing Field, a timely book on the linkages between climate change and trade policy.

WHEN: Wednesday, May 21, 2008, Noon - 2 p.m.
(Lunch at noon, program at 12:30 p.m.)

WHERE: Peter G. Peterson Institute for International Economics
1750 Massachusetts Ave., NW, Washington, D.C. 20036
(Metro: Red Line to Dupont Circle)

WHO: Jonathan Lash, president, World Resources Institute

C. Fred Bergsten, director, Peterson Institute for International Economics

Rob Bradley, director, International Climate Policy Initiative, World Resources Institute

Trevor Houser, visiting fellow, Peterson Institute for International Economics

WHY: In recent presidential-campaign developments, John McCain has backed away from the threat of carbon tariffs, while Barack Obama hints that the issue will serve as a litmus test for whether McCain is serious about climate policy. Trade links to climate policy will only continue to heat up as the full Senate begins debate on June 2 of the Lieberman-Warner bill, which includes provisions for carbon-based border tariffs.

This new book argues that such a unilateral approach will be unsuccessful both in protecting U.S. industry and bringing other countries, such as China, to the negotiating table. Speakers will offer alternatives that would prevent U.S. industry from migrating to countries without climate policy, strengthen international negotiations under which those countries will reduce emissions, and avoid starting a trade war.

RSVP: Katharine Keenan, Peterson Institute,
+1 (202) 454-1334, kkeenan@petersoninstitute.org
Please indicate if any technical assistance is required.

WRI Joins North America’s Largest Greenhouse Gas Reporting Partnership

Paul Mackie — Wed, 14 May 2008 14:51:34 -0400

The Climate Registry, which uses accounting methodologies created by the World Resources Institute, will name WRI one of its founding reporters next month.

To date, WRI and more than 100 businesses and organizations have committed to report to The Climate Registry, which bills itself as “North America’s largest climate change organization.” It is, according to the Denver Post, “a nationwide program in which participants quantify and publicize their greenhouse gas emissions as a first step in reducing them.” The Registry was founded by 39 U.S. states, seven Canadian provinces, six Mexican states, three Native American tribes, and the District of Columbia.

“WRI has demonstrated exemplary environmental leadership by courageously stepping forward to support The Climate Registry in its preliminary stages,” said Gina McCarthy, chair of The Climate Registry.

“We have reported our annual emissions publicly on our Web site since 2001,” added Jonathan Lash, WRI president. “Registries like this are tremendously important as tools to allow companies, organizations, and civil society to track our progress in managing and reducing emissions.”

The Climate Registry is a non-profit organization established to measure and publicly report greenhouse gas (GHG) emissions in a common, accurate and transparent manner consistent across industry sectors and borders. All emissions reported require third-party verification. The Registry represents a linking of several state-sponsored GHG emissions reporting efforts, including the California Climate Action Registry and the Eastern Climate Registry. It is anticipated that mandatory state-level GHG reporting programs will be linked with the Registry.

The Climate Registry’s protocols are based on the internationally recognized Greenhouse Gas Protocol, which was created by WRI and the World Business Council for Sustainable Development and is the most widely used international accounting tool for governments, companies, and organizations to measure and report their GHG emissions. WRI also played an active role in the development of the Climate Registry.

Making the Carbon Offset Market Work

Derik Broekhoff — Wed, 13 Feb 2008 09:58:27 -0500

There are two ways the U.S. government could bring consistency and credibility to the voluntary carbon offset market: endorse an existing program and provide guidance, oversight and/or enforcement.

That was the basis of my testimony (PDF, 259 Kb) to the U.S. House of Representatives Select Committee on Energy Independence and Global Warming last July. Then last month, the Federal Trade Commission held a workshop to explore how to provide guidance and oversight.

The booming increase in sales in the voluntary offset market - growing globally from 6 million CO2-equivalent tons in 2004 to between 10 and 13 million tons in 2006 (and probably much more in 2007) - has led to a growing interest by federal policymakers in establishing regulations and standards for the purchase of offsets. While the FTC is looking at the voluntary market, the Lieberman-Warner global-warming bill percolating in the Senate includes measures for mandatory offsets and may be voted on this year.

As my presentation at the FTC workshop indicated, however, providing guidance about marketing claims for voluntary carbon offsets may be trickier than it seems. The reason is that there are various ways to substantiate and quantify emission reductions for carbon offsets, and the “right” way can depend on circumstances and your view of the overall objectives for the carbon-offset market.

It is hard to separate larger policy questions about the market from the methods used to certify offsets, something WRI and the World Business Council for Sustainable Development highlighted in our “Greenhouse Gas Protocol for Project Accounting,” published in November 2005 - see Greenhouse Gas Protocol. It may be easier to develop clear and consistent rules in the context of a mandatory program - like that envisioned under Lieberman-Warner - than for the voluntary market, where there is no central authority to decide unavoidable tradeoffs between things like transparency, practicality, and environmental integrity.

In the meantime, companies are moving forward in spite of uncertainties. The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, has become wildly popular as a emissions-accounting tool for companies to measure their carbon footprints. In the past month alone, there have been dozens of media reports of companies - from wine makers to Dell to Pepsi - adopting the corporate GHG Protocol to inventory their emissions, despite the lack of mandatory oversight. We’ve been very busy fielding calls from interested businesses.

While it is important for companies to identify ways to reduce their greenhouse gas emissions internally, clearer standards for carbon offsets (either through oversight and guidance for voluntary markets, or the establishment of a mandatory government-offset program) would help these companies achieve even greater benefits for the environment.

Forests Finally Emerging as Climate Issue

Fred Stolle — Thu, 31 Jan 2008 10:53:20 -0500

The representatives of more than 100 countries attending December’s U.N. climate conference in Bali, Indonesia, finally focused on the important role tropical forests play in global warming.

Developed countries have pledged almost $300 million to help forest-rich developing countries prepare for their new roles and responsibilities in the post Kyoto international climate-change agreement set to start after 2012.

Deforestation, especially in the tropics, has been a global problem for decades, with serious implications for the livelihoods of poor people living in the forests as well as global biodiversity.

Despite the fact that deforestation accounts for about 20 percent of global greenhouse gas emissions, tropical forests have thus far been excluded from international climate agreements, including the Kyoto Protocol.

In Bali, an agreement about Reducing Emissions from Deforestation in Developing Countries (REDD) was reached to include the reduction of tropical deforestation as part of the solution to climate change. Although the details are still being worked out, the new agreement will give significant roles and responsibilities to developing countries, especially those with large forest areas such as Indonesia and Brazil.

The recognition by developed countries of the need for immediate funding to developing countries to strengthen forest governance - and the fact that developing countries must also share responsibility to fight climate change - is an important development. It has led to the launch of the World Bank’s new Forest Carbon Partnership Facility, which was partly shaped with input from WRI and will compensate developing countries for reducing CO2 emissions related to maintenance of their forests.

Indonesia, for example, has already carried out a forest governance assessment, with the assistance of WRI, the World Bank, and other organizations. Indonesia’s initiative will serve as an example for the establishment of forest-carbon programs in other developing countries.

Movement like this must happen now, because only by immediately addressing current forest governance problems - such as the need for better law enforcement, distribution of benefits, and access to forest lands - will countries be prepared for a carbon-constrained future.

This article appeared originally at Mongabay.com