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The theory is that the system will enable maximum economic efficiency and flexibility for the market by allowing those entities that can get the cheapest emissions reductions to get lots of them. Those entities could then sell emission reduction "credits" in a market to those who would have to pay much more to achieve the same reductions. These processes theoretically combine to produce the lowest price for the reduction of emissions in the economy, and thus ease the overall economic impact of controlling global warming.
Some cap and trade proposals are designed to be "economy-wide," to take on the whole of U.S. emissions. Others are or could be limited to the utility, industrial, or transportation sectors or some combination thereof.
Offsets are not involved when trading of emission reduction credits occurs within regulated sectors (or within the economy, if it all comes under regulation): trading is between businesses that are over and under the current cap. Offsets are investments in emissions reductions outside of regulated industries (or the entire economy), for example, investments in tree planting. Because of various issues involved with offsets as used in Europe, they have come under criticism for not actually resulting in emissions reductions, and there is concern about using them in the US.
Within a cap-and-trade program, carbon offsets might be permitted as one tool for achieving emissions reductions, but they don't define the program itself.
PDA is asking members to contact their Congressional Representatives and ask them to sign on to a climate principles letter for presentation to Speaker Pelosi. The Speaker approves the letter, which is serving as a teaching and consensus-building tool for what a high quality global warming law would look like. Read the background article.
The letter addresses carbon offsets: "Any offsets must be real, additional, verifiable, permanent, and enforceable. The percentage of required emissions reductions that may be met with offsets should be strictly limited, and should be increased only to the extent that there is greater certainty that the offsets will not compromise the program's environmental integrity." [Italics added]
In its present form, HR 1590 does not mention carbon offsets, but since the subject may come up as the bill is debated, the principles letter provides guidance. Henry Waxman (D-CA-30) is author of HR 1590 and is also one of the House leaders circulating the letter, so it's reasonable to think he expects the guidance to apply to his own bill.
Two methods besides cap-and-trade have been discussed as ways to reduce greenhouse gas emissions and spur the transition to a green economy: a carbon tax and direct regulation. Many favor cap-and-trade over a carbon tax because the tax is not likely to pass, and because a cap can specify the amount of reduction desired-it may be difficult to determine what tax level would achieve a given level of reduction.
On the other hand, direct regulation can supplement a cap-and-trade system in situations where it is effective. For example, HR 1590 includes a national renewable energy standard and an energy efficiency standard along with cap-and-trade.
Besides the question of what role carbon offsets should play in a cap-and-trade system, there are a number of other issues that should be carefully addressed, including: how much of the economy should come under cap-and-trade; should emission allowances be given away or auctioned; and how should auction proceeds be spent? These issues can be discussed during debate on HR 1590 or any similar bill.
Send a message to your Representative asking him or her to sign the climate principles letter.
Join the Stop Global Warming Issues Organizing Team; contact Laura@pdamerica.org.
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