Offsets under the Waxman-Markey Bill would mean no cuts till 2026

This week, the US Committee on Energy and Commerce is holding hearings on the Waxman-Markey bill. “The mother of all climate weeks”, Politico calls it.

Three weeks ago Henry Waxman, House Energy and Commerce Committee Chairman, and Ed Markey, Energy and Environment Subcommittee Chairman, introduced a draft bill outlining a cap-and-trade system. But as a recent critique from International Rivers and the Rainforest Action Network points out, the Waxman-Marley Bill “is seriously weakened by its heavy reliance on offsets to substitute for actual emissions cuts by large polluters.” REDD would form part of this offset loophole.

Under the draft bill, polluters would be able to buy offset credits up to a total of two billion offsets a year (one billion domestic, one billion international). Each offset is supposed to be an avoided emission of one metric ton of carbon dioxide. “This is equivalent to almost 30% of 2005 emissions!” Payal Parekh of International Rivers points out.

“If polluters indeed use the maximum allowable number of offset credits,” Parekh writes, “domestic emissions in 2012 would increase by 38% rather than decrease by 3%, the reduction that the cap sets. Emissions would not dip below 2005 levels until 2026, 17 years from today.” Instead of an emissions reduction of 83% by 2050, the reduction would only be 50%. The graph above illustrates the point (click on the image for a larger version). “These reductions are clearly not enough to prevent global temperature from rising by more than two degrees Celsius (3.6° F), a threshold that many scientists believe will lead to dangerous consequences, if crossed,” International Rivers’ Parekh notes.

International Rivers and RAN have produced an “Initial Analysis of Offsets Provisions in the Draft of the American Clean Energy and Security Act of 2009 (ACESA)”. The analysis includes the following comments relating to REDD:

ACESA intends to reduce emissions from tropical deforestation via two contrasting approaches. The first, called Supplemental Emissions Reductions from Reduced Deforestation, is a fund-based approach. It is financed through an initial allocation of 5% of the US emissions allowances (declining to 2% in later years). Sales of these allowances are used to create a fund with the aim of slowing tropical deforestation emissions by at least 720 million tons per year by 2020. This would occur through investments in capacity building and forest conservation, and in principle would represent an additional 10% of emission reductions on top of the cuts achieved in the US in 2020 from capped sources. The fund approach as written into the draft bill could enable effective policies, activities and measures to slow tropical deforestation. Unfortunately, this positive fund-based approach would be undone through the second approach, which is based on bringing hundreds of millions of tons of international forestry offsets into the US carbon market each year.
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Offsets from Reduced Deforestation

The third strategy for international offsets outlines a new system based on the goal of reducing tropical deforestation. Policy development in this arena is even more contentious than industrial sector approaches, given tropical forests’ ecological complexity and the major differences between forests in different places in terms of ecological types, carbon fluxes, threats from human disturbance, and local socio-economic realities. Forests are also subject to complex issues surrounding unresolved land tenure rights, weak governance, huge variations in estimates of carbon stocks and fluxes, and uncertainties over how to monitor emissions and the impacts of policies upon rates of deforestation and emissions. Forest credits also have a well-recognized potential to destabilize carbon markets by introducing large volumes of cheap offsets. ACESA envisions offset credits for “sustainable forestry practices,” a widely abused term that is too often a cover for expanded industrial logging into primary tropical rainforests. Unless forest degradation is included, even heavily logging a forest, which would result in large emissions, could still generate offset “credits” because full deforestation was avoided.

At the international negotiations level, rules for inclusion of forests and land use sectors in offsets have proven to be particularly prone to perverse outcomes for both forests and the climate, often floundering on such seemingly simple starting points as the definition of a forest. While some initial safeguards are suggested in the draft bill, including eligibility criteria for countries where projects can be based, they are by no means sufficient or sufficiently spelled out. On the positive side, the bill does, however, specify “the establishment and enforcement of legal regimes, standards and safeguards that give due regard to the rights and interests of local communities, indigenous peoples and vulnerable social groups.” The challenge will be how this works in practice and the time actually needed to give meaningful “due regard” to these rights.

Again, as experience with the CDM has shown, wealthy and powerful financial and industrial interests will be pushing for simple standards and minimal safeguards in order to meet the massive market for international offsets envisioned in this bill as quickly as possible. The rights and interests of local communities will therefore be at risk of being rolled over in the rush to develop profitable offset projects.

Forest carbon is inherently difficult to measure, national and sub-national inventories are generally highly uncertain, and the forests themselves are very dynamic with large and largely unpredictable inter-annual variability that can send them from massive sinks to sources from one year to the next and vice versa. While the draft bill requires the US administrator of the scheme to assess the technical capacity to measure forest carbon in the countries supplying the offset credits, in the real world the investment costs to develop accurate monitoring and verification systems are prohibitively expensive for developing countries — and in fact have not yet been fully implemented even in the US.

Participating countries must set deforestation reduction targets with the aim of halting gross deforestation within 20 years and address a set of social and environmental safeguard criteria. Even so, it is a dubious proposition that an infusion of carbon offset money, despite the support the bill as written would provide, would help these countries overcome their high rates of illegal logging and poor enforcement of environmental and social laws. In fact, the concern is the opposite, that quick profits promised by addressing deforestation through offset mechanisms will undermine other deeper efforts to promote meaningful governance reform and address underlying drivers of deforestation.

Currently about 20% of total global greenhouse gas emissions come from tropical deforestation, and it is laudable that through this bill the US, which is also a major market for timber, paper, and agricultural products from tropical rainforest regions, would attempt to address this issue. The draft bill’s fund-based approach, however, which would provide assistance for developing country efforts to reduce emissions from tropical deforestation, provides a much better mechanism for addressing this issue than offsets.