Observations on the Potential Role of Carbon Offsets in Climate Change Legislation

 
See figure 2 for a hypothetical depiction of an offset project measured against a projected business-as-usual scenario.

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In an August 2008 report, Government Accountability Office identified four primary challenges related to the United States voluntary carbon offset market. First, the concept of a carbon offset is complicated because offsets can involve different activities, definitions, greenhouse gases, and timeframes for measurement.

Second, ensuring the credibility of offsets is challenging because there are many ways to determine whether a project is additional to a business-as-usual baseline, and inherent uncertainty exists in measuring emissions reductions relative to such a baseline. Related to this, the use of multiple quality assurance mechanisms with varying requirements may raise questions about whether offsets are fully fungible — interchangeable and of comparable quality.

Third, including offsets in regulatory programs to limit greenhouse gas emissions could result in environmental and economic tradeoffs. For example offsets could lower the cost of complying with an emissions reduction policy, but this may delay on-site reductions by regulated entities. Fourth, offsets could compromise the environmental certainty of a regulatory program if offsets used for compliance lack credibility.

In a November 2008 report, GAO examined the environmental and economic effects of the CDM—an international program allowing certain industrialized nations to pay for offset projects in developing countries—and identified lessons learned about the role of carbon offsets in programs to limit emissions.

While the CDM has provided cost containment in a mandatory emissions reduction program, its effects on emissions are uncertain, largely because it is nearly impossible to determine the level of emissions that would have occurred in the absence of each project.

The concept of a carbon offset is complicated because offsets can involve different activities, definitions, greenhouse gases, and timeframes for measurement.
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Although a rigorous review process seeks to ensure the credibility of projects, available evidence from those with experience in the program suggests that some offset projects were not additional. In addition, the project approval process is lengthy and resource intensive, which significantly limits the scale and cost-effectiveness of emissions reductions.

Courtesy of Government Accountability Office