California Climate Legislation and Offsets

While there has been a lot of attention on whether Washington will pass climate legislation soon, the state of California did back in 2006. Assembly Bill 32 (A.B. 32) requires greenhouse gas emissions to return to 1990 levels by 2020 in the state. This target is much weaker than what climate science  calls for, but it is a start and the bill does have some good provisions in it.  For example, the bill focuses on policy measures to achieve the  majority of the reductions, such as clean energy, clean transportation and efficiency standards.  Market-based cap and trade is only responsible for 20% of reductions.

Allowable number of offsets under AB 32 (From Union of Concerned Scientists)
Allowable number of offsets under AB 32 (From Union of Concerned Scientists)
The California Air Resources Board (CARB) is in the midst of developing rules to implement these policies.  In the draft rules the offset limit is calculated as 49% of necessary emissions reductions needed relative to California's emissions in 2012. According to our friends at the Union of Concerned Scientists, the number of allowable offsets exceeds the reductions necessary under the cap and trade program until 2018 (see figure to the right)!  Worse still, if the maximum number of offsets are used, total emissions in the capped sector could increase above 2012 levels through 2015.

International Rivers has been weighing in on the quantity and quality of offsets in the cap and trade program.  We have recommended that international offsets not be permitted, since they are a loophole that allows emitters to delay action domestically. The result is that emissions reductions are likely to be more expensive in the long run and communities in California living next to a dirty facility continue to suffer adverse health and environmental impacts.

We have also provided comments on how to improve the quality of offsets (or reduce their harm) to CARB. Our recommendations include exclusion of credits generated through the CDM, improving the assessment of additionality, inclusion of co-benefit and public participation criteria, and the exclusion of hydropower projects as a project type.

Given the recession, it is likely that offsets aren't even necessary to meet the target. The US Energy Information Administration (EIA) predicts that 2009 emissions will be almost 9% lower than in 2005 in the US. California's 2020 target, a return to 1990 levels, translates to 10% below 2005 pollution levels in California.  Not only could California do away with offsets, but it could significantly increase the ambition level of the cap.

California is a trailblazer, often enacting legislation that paves the way for federal legislation (read this excellent analysis about climate legislation and California by Hunter Cutting and Gary Cook).  If California adopts stringent limits and quality criteria for offsets, it will set a high standard for a federal bill in the future.  California also has the opportunity to show that a climate bill can actually stimulate the shift to a cleaner, greener economy.