| June 2, 2009 |  |
California Considering Offsets Limit
Assembly Bill Will Likely Face Vote This Week
During the first week of June, the California Assembly is expected to vote on a bill that would limit the role of offsets in the state's landmark global warming law. The bill, AB 1404, has the support of the Union of Concerned Scientists, the California State Building and Construction Trades Council, and more than 60 health, labor, environmental, faith, social justice and civic organizations that say the bill would foster green job growth in the state, reduce smog-forming air pollutants that endanger public health and help the state meet its emissions-reduction goals.
The state's landmark climate bill (AB 32) allows the California Air Resources Board's (CARB) to establish a cap-and-trade program. The program proposed by CARB would set a declining limit on global warming pollution from sources covered by the cap, including electric power plants, fuel providers and industrial facilities. Polluters would need to obtain an allowance for each ton of global warming pollution they emit. Every year, the state would distribute fewer and fewer allowances, thus ratcheting down the amount of pollution emitted.
Offsets would offer polluters an alternative to obtaining allowances or cutting their own emissions. By using offsets, a polluter pays others to cut or sequester carbon instead of making the cuts himself. For instance, an electric utility in California might pay a business in Mexico to capture methane from a pig farm rather than build a wind farm in California or reduce its own global warming pollution by cleaning up one of its fossil-fuel plants. If a California utility bought such an offset, it would do nothing to reduce harmful air pollution in California or foster investment in local global warming solutions that create new green-collar jobs.
Offsets have become of the most controversial features of cap-and-trade programs at the state, regional, national and international levels. Given that California is ahead of the rest of the nation in implementing an economy-wide cap-and-trade system for global warming pollution, the way the state approaches this thorny issue could impact other initiatives.
CARB has proposed that as many as half of all global warming emission reductions below the 2012 cap could be achieved through offsets. It is unclear whether CARB would impose any geographic restrictions on where offset credits could be generated.
Assemblymembers Kevin De Leon (D-45), Manuel Perez (D-80) and Wilmer Amina Carter (D-62) introduced the bill, which would explicitly limit the use of offsets in California's cap-and-trade system and prioritize in-state offsets that provide local environmental and public health benefits.
TOO MANY OFFSETS COULD UNDERMINE GREEN JOB GROWTH
According to CARB's economic analysis, implementing California's global warming policies without offsets would create an estimated 500,000 new jobs in the state. Some of those jobs would likely be lost if local climate action is outsourced to other parts of the country or to other nations.
In-state climate action can drive many types of job growth. According to a recent study (pdf) produced for the non-partisan advocacy group Next Ten, state energy efficiency measures have enabled California households to save $56 billion on their energy bills from 1972 to 2006. The study found that Californians spent that money in more economically productive sectors of the economy, creating about 1.5 million jobs. According to the study, for every job that was not created in the oil, gas or electric power sector because of energy efficiency gains, the study found, more than 50 new jobs were created across the state's diverse economy.
OFFSETS CAN UNDERMINE PUBLIC HEALTH BENEFITS FROM CLIMATE ACTION
When electricity generators, fuel providers refineries, and other regulated polluters reduce their global warming emissions, they often simultaneously cut smog-forming and toxic air pollutants as well. Offsets, however, decrease the incentive for polluters to reduce their own emissions. Thus, offsets also could undermine the potential reductions of smog-forming and toxic pollution that accompany local climate action.
Limiting the use of offsets will help ensure that the state's most heavily-polluting facilities are retrofitted or replaced as soon as possible. That would especially benefit communities located near oil refineries, natural gas depots or other fossil-fuel facilities, as well as communities plagued by severe air quality problems. Several regions in the state rank among the highest in the country for unhealthy air. For example, all or parts of 30 California counties do not meet federal health standards for PM 2.5, the most dangerous type of lung-damaging particulate matter, which is less than 2.5 microns in size.
A recent University of California Berkeley study (pdf) examined two scenarios: one in which all of California's cap-and trade-reductions were met through offsets, and one in which cap-and-trade reductions were met by directly lowering emissions from California's electricity, transportation and industrial sectors, the sectors regulated by the cap-and-trade program. It found that smog-forming and toxic air pollutant reductions were greater without offsets. Specifically, the study projected that levels of smog-forming and particulate matter pollution would be 4,000 and 2,000 tons lower per year, respectively, in 2020 under the no-offsets scenario than the with-offsets scenario.
The level of PM 2.5 pollution under a no-offsets scenario would be 400 tons less per year compared to the offsets scenario -- equivalent to the annual PM 2.5 emissions from some 9,000 big-rig trucks operating on California's roads.
WHAT OTHERS ARE SAYING ABOUT THE NEED TO LIMIT OFFSETS
In testimony before Congress (pdf) in March, John Stephenson, director of Natural Resources and the Environment at the Government Accountability Office, said: "…[T]he use of offsets can compromise the integrity of programs designed to reduce greenhouse gas emissions.... [S]tringent limits can ensure that a certain portion of [emission reductions] occurs at home and help secure a carbon price that is high enough to spur investment in low-carbon technologies…. If limits are imposed, it is important that such limits are sufficiently stringent…."
University of California Berkeley labor economist Carol Zabin wrote in a policy brief (pdf) released in February, "Offsets should be limited to a small portion of covered entities' compliance obligations, and offset projects in California should be given preference. This geographic preference would keep jobs and investment in California."
In its 2007 recommendations on cap-and-trade system design, California Gov. Arnold Schwarzenegger's AB 32 Market Advisory Committee (pdf), comprised of experts from across the United States and Europe, warned that "depending on the size and scope of the [cap-and-trade] program, and the scope of potential offsets, the number of staff needed to implement an effective offset monitoring program could conceivably be larger than the staff needed to run the cap-and-trade program itself."
In March, a representative from the California Legislature's nonpartisan Legislative Analyst's Office (LAO) testified before the Assembly Committee on Natural Resources (1:28:20 in linked video) that the office saw a valuable opportunity for the Legislature to intervene on the offsets issue. The LAO rarely recommends that the Legislature involve itself in executive agency decisions, such as CARB's implementation of the global warming law. The LAO representative told the committee, "[T]he use of market mechanisms, and particularly cap and trade, involve a long list of policy choices that we think are very important for the legislature to make. Just to give a few examples, there's the issue of the initial allocation of emission allowances…and the use of offsets and the parameters for that. A number of bills have been introduced on this subject, so it seems like members of the legislature are …providing some important policy guidance of the use of market mechanisms."
The Union of Concerned Scientists puts rigorous, independent science to work to solve our planet's most pressing problems. Joining with citizens across the country, we combine technical analysis and effective advocacy to create innovative, practical solutions for a healthy, safe, and sustainable future.
