Posted by Danny Morris on April 3, 2009
Hey, did you know that this week is International Offset Week? Oh you didn’t? Well, that’s probably because it’s not, but with all the posts about it here on CT the past couple days it might as well be. In my world, it’s been 648 pages of climate legislation week. One of the big issues I’ve mentioned in previous posts was how the Waxman-Markey bill would treat offsets. Turns out, it luuuuuuuvvvvvvvvvvvvvsssss them. As Andrew pointed out yesterday, a lot of this legislation came straight from recommendations from the US CAP, and they loaded it up with as many offsets as they could find. Seriously. You should go out and horde lodgepole pine seeds and move on top of a covered landfill, because you could potentially be sitting on a gold mine in a few years. How many offset credits will be in a future carbon market? I’ve crafted a handy-dandy (updated!) table below to show you:
|Year||Emissions (mmt)||Offsets (%)||Emissions offset (mmt)||Actual offsets (mmt)|
For those of you not in the know, mmt = million metric tons.
In the major proposed legislation of the 110th Congress, few of them were willing to give offsets more than 30-35% of the total cap. As you can see, Waxman-Markey blows them out of the water, allowing 30% of the total cap to be achieved through offsets in the 1st few years before eventually increasing to 63% by 2050. That’s a lot of offsets. The first question I have is: are there enough offsets out there that are reputable enough to be included in a market starting in 2012? I’m pretty sure there are not, and ClimateWire tells me that a report by Point Carbon (sub req’d) has found essentially the same thing. So let’s see, you not only give emitters an easy out for emissions reductions, but also make it a substantial portion of the entire market, generating lots of demand for a product that is in short (and potentially questionable) supply. I’m not entirely sure how to describe your eventual outcome, but i think it might rhyme with mustard-duck.
Update: A little bit more on how the offset totals are calculated. The cap for offsets in any year is 2 billion tons. The legislation states that the way to determine the applicable percentage of offsets in any year’s market is to take 2 billion, divide it by 2 billion plus the emissions cap for the last trading year, then multiply that by 100 to get your percentage. BUT, remember that 1.25 offset credit = 1 emission credit, meaning your actual avoided/reduced emissions is 80% of the offsets in the market. I’ve updated the table above to illustrate things a bit further.
Later Update: After re-reading the bill itself, and looking at some other analyses, I realized I misinterpreted how the bill treats offset credits and emissions credits. I thought 2 billion was the absolute cap for offsets and actual emissions reductions would be 80% of that due to the 1.25 = 1 conversion rate in the bill. Now I think that that is the cap for credited emissions, which means the actual amount of capped offsets could go as high as 2.5 billion (125% of 2 billion). The table has been corrected again. I humbly throw myself at the feet of the readership and beg forgiveness. Can we make up? It pains me to think some of you might go to bed angry with me.