| July 23, 2008 |  |
Western States Regional Partnership to Issue Cap and Trade Plan
Science group points out serious flaw in California program design; warns that Western states could make the same mistake
The Western Climate Initiative (WCI), a partnership among seven states and four Canadian provinces to reduce global warming pollution, is expected to release recommendations today for a regional cap-and-trade system. This is the first WCI meeting since California released its own proposal for reducing global warming pollution last month.
Both WCI and California are grappling with the controversial issue of "offsets." Offsets would allow polluters to purchase emissions reductions from uncapped sectors or countries, instead of reducing an equivalent amount of their own emissions or buying allowances from other capped facilities. Offsets have become one of the most contentious design elements in state, regional, and federal cap-and-trade systems.
THE CALIFORNIA PROPOSAL
California drafted its plan in response to a new state law requiring global warming emissions reductions to 1990 levels by 2020, amounting to a 29 percent decrease from business as usual levels. The proposal makes strong recommendations for cutting pollution from the energy and transportation sectors, however, its proposed cap-and-trade program is deficient, according to the Union of Concerned Scientists (UCS).
The plan currently calls for meeting 20 percent of the pollution reduction goal through a cap-and-trade system. Under that system, businesses would be required to obtain allowances—sometimes called tradable permits—for all of their global warming emissions. The total amount of allowances allowed into the market each year would be ratcheted down until the 1990 emissions level is reached. Thus, the state government would be able to guarantee a certain amount of overall pollution reduction while giving businesses flexibility to find the most efficient way to cut emissions.
However, the California cap-and-trade proposal may allow businesses to use offsets to meet all of the emission reductions required by the cap and trade program. That approach would undercut the state's goal of maximizing emission reductions in the state's highest-emitting sectors—transportation, electricity, natural gas, and industry, according to UCS.
California will finalize its plan in November.
(Download a PDF of a new policy brief by University of California Berkeley economist David Roland-Holst on the benefits of limiting offsets in a California cap-and-trade program.
For the executive summary of a soon-to-be-released paper by UCS Climate Economist Christopher Busch on the benefits of limiting offsets in California and regional cap-and-trade programs, go to Climatechoices.org.
WCI'S PROPOSAL
WCI's goal for the region is reducing global warming pollution 15 percent below 2005 levels by 2020. For each state that goal translates into a different reduction level.
WCI has stated that its plan should limit the use of offsets to ensure that sources covered by the cap-and-trade system reduce their emissions. "WCI must ensure that only a small fraction of the program's emission reductions come from offsets," said Erin Rogers, a UCS spokesperson.
WCI will hold its final public meeting in San Diego on July 29 and then finalize its pollution-reduction recommendations for the region in September. States then will decide whether to follow the recommendations. (For more on the July 29 WCI meeting, go to: www.westernclimateinitiative.org/WCI_Meetings_Events.cfm.)
BENEFITS OF LIMITING THE USE OF OFFSETS
CLEANER AIR: Reducing global warming pollution will help us avoid the worst consequences of climate change, but it also will provide many other environmental benefits. When electric utilities, oil and gas companies, and other industrial sources reduce their global warming emissions, Californians will be exposed to lower levels of conventional smog-forming and toxic air pollutants as well. This improved air quality will in turn lead to better public health, lower health care costs, and higher levels of worker productivity and student performance. On the other hand, if the state program allows offsets from anywhere in the world-the equivalent of outsourcing emissions reduction projects-these valuable health benefits would be lost.
CLEAN-TECH DEVELOPMENT: A 2004 survey by Environmental Entrepreneurs found that California's strong climate policies are one of the main reasons venture capitalists invest in the state's clean-technology industry. And that sector is surging. Last year, California attracted more venture capital in clean tech than did all of Europe. Carefully designed offset limits would help maintain this trend. By contrast, overly permissive offset policies would shift emissions reductions from capped sectors to other sectors or geographic areas. California likely would lose its competitive advantage in this rapidly growing global market.
FEWER NEW FOSSIL FUEL POWER PLANTS: The broad reach of the cap-and-trade program proposed in the draft plan would cap nearly all fossil-fuel combustion in transportation, electricity generation, and other industrial activities. Carefully designed offset limits would spur technological changes in capped sectors by forcing emissions reductions instead of diverting those reductions to other sectors of the economy or other geographic areas. Unlimited offsets, conversely, could prompt companies to build new highly polluting facilities and buy cheaper offsets instead than cutting their own emissions. This would make the task of reducing global warming pollution far more difficult in the short timeframe we have left to avoid the worst consequences of climate change.
(For more on how limits on offsets benefit renewable energy development, go to: www.climatechoices.org/ca/assets/ca_offsets_and_renewables.pdf.)
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.
