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

This testimony by John Stephenson, Director Natural Resources & Environment before the Subcommittee on Energy and Environment, Committee on Energy and Commerce, House of Representatives sets forth four challenges to the implementation of Climate Change policies.

The four primary challenges related to the United States voluntary carbon offset market are: 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.

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