A summary of Offset Provisions in Current
US Cap-and-trade Legislation
Several cap-and-trade bills are currently under consideration in the US. The American Clean Energy and Security Act of 2009 (ACESA) H. R. 2454, introduced by Representatives Waxman and Markey, was passed by the House of Representatives on June 26, 2009.
The Senate has, as of late November 2009, not yet passed a bill. In contrast to the House, where ACESA was the sole climate change bill considered, the Senate is debating several bills, which may be combined in some way if all reach the floor. The largest and most comprehensive bill currently under consideration in the senate is S. 1733, Clean Energy Jobs and American Power Act (CEJAPA), introduced by Senators Kerry and Boxer. Two other Senate bills are S. 2729, Clean Energy Partnerships Act (CEPA), introduced by Senator Stabenow and 7 co-sponsors and S. 1462, the American Clean Energy Leadership Act of 2009, introduced by Senator Bingaman. It is unclear when the senate will debate these bills, Spring 2010 is most likely. Senators Kerry and Lieberman announced in mid November 2009 that they are hopeful that all five Senate committees with jurisdiction over climate change and energy matters will complete work in time to develop a bipartisan ‘framework’ to combat climate change. This framework would presumably form the basis for a unified bill which the senate would develop at a later point.
The table below summarizes the general offset provisions in the House bill (ACESA) and the Senate bill (CEJAPA). Information provided is based on the original bills (see links above) and the summaries of the bills provided by the World Resources Institute (Larsen et al 2009). We emphasized in bold some of the main differences between the two bills.
Category/Option |
House of Representatives: ACESA |
Senate: CEJAPA (unless otherwise indicated) |
General Rules |
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|
Overall goal |
Although not explicitly stated, the Review And Program Recommendations require the review of whether United States actions (taking into account international actions, commitments, and trends, and considering the range of plausible emissions scenarios) are sufficient to avoid atmospheric GHG concentrations above 450 ppm carbon dioxide equivalent; and to avoid global average surface temperature 3.6 degrees Fahrenheit (2 degrees Celsius) above the pre-industrial average, or such other temperature thresholds as the Administrator deems appropriate. Sec. 705 (e)(2) |
Same as ACESA |
Overall reduction targets |
2005 as baseline: |
2005 as baseline: |
Offset Integrity Advisory Board |
Not later than 30 days after the date of enactment of this title, the Administrator shall establish an independent Offsets Integrity Advisory Board. The Advisory Board shall make recommendations to the Administrator for use in promulgating and revising regulations under this part and part E, and for ensuring the overall environmental integrity of the programs established pursuant to those regulations. Sec. 731 p.776 |
Same as ACESA |
Establishment of Offset Program |
Not later than 2 years after the date of enactment of this title, the Administrator, in consultation with appropriate Federal agencies and taking into consideration the recommendations of the Advisory Board, shall promulgate regulations establishing a program for the issuance of offset credits in accordance with the requirements of this part. The Administrator shall periodically revise these regulations as necessary to meet the requirements of this part. Sec, 732, p.780 |
Same as ACESA. |
Offset limits |
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|
Total limit |
No more than 2 billion tons of offsets annually may be used for compliance (Sec. 722, p. 740). The President may make a recommendation to Congress regarding whether the 2 billion ton limit should be increased or decreased (Sec. 722, p. 743). |
Same as ACESA (Sec. 722, p. 494). |
Domestic versus International offsets |
Of the total offsets allowed, not more than half can come from domestic or term offsets and not more than half can come from international offsets. |
Same as ACESA with the following exceptions:
|
Entity-level offset limits |
Covered entities may satisfy a percentage of their compliance obligation with offsets each year. This number is divided pro rata among covered entities. This percentage limit varies year to year and is determined by the administrator by dividing the number 2 billion by the sum of 2 billion plus the number of emission allowances in the previous year’s allowance budget and multiplying that number by 100. (Sec.722, p. 741) |
Covered entities may satisfy a percentage of their compliance obligation with offsets each year. This number is determined by the ratio of an entity’s compliance emissions to system-wide compliance emissions in the year two years before the current compliance year multiplied by two billion (Sec. 722, p. 492). |
Offset Discounting |
Beginning in 2018, a covered entity must surrender 1.25 international offset credits in lieu of 1 allowance for any international offset credits (Sec. 722, p. 743). |
Same as ACESA |
Offset Types |
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|
Eligible offset project types |
The Secretary of Agriculture will oversee the domestic agriculture and forestry offset programs. The Secretary has 1 year from the date of enactment to establish the program governing domestic offsets (Sec. 502, p. 1390). The Secretary shall review the program and based on updated information and the recommendations of the Advisory Board shall update and revise the offset program. Initial list of agricultural and forestry project types are spelled out in Sec 503, p. 1393. |
Not later than 1 year after date of enactment the president shall establish the initial list of eligible project types for which there are well developed methodologies. (Sec. 733, p. 533) includes list of priority projects for consideration by the president. The president shall add additional project types to the list not later than two years after date of enactment and may at any time add to or remove from the list a specific project type. Any person may petition to modify the list (Sec. 733, p. 537). CEPA: Established the Department of Agriculture Role as the offset program administrator. Specifies what types of domestic offset projects should be allowed and outlines the registration and issuance process, as well as the accreditation process for validators and verifiers. Elaborates on early offset supply rules from international REDD projects but does not elaborate on general REDD requirements or any other international offsets. |
Offsets crediting periods |
5 years for agricultural sequestration, 20 years for forestry and 10 years for other practice types. Crediting period renewals are unlimited, but can be limited for some project types by the Secretary (Sec. 504, p. 1404). |
Same as ACESA |
International Offsets |
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Administration |
The Administrator, in consultation with the Secretary of State and Administrator of USAID, may issue international offset credits based on projects that avoid, reduce or sequester emissions in developing countries. Regulations must be promulgated within 2 years from date of enactment (Sec. 743, p. 805). |
Same as ACESA |
Regulation |
International offset credits may be issued only if: |
Same as ACESA plus: |
Project Sources |
Offset credits may be issued for projects identified by the Administrator under Sec. 733, through an approved international body, sectoral crediting mechanisms, or international reduced deforestation as outlined in legislation (Sec. 743, p. 805). |
Offset credits may be issued for projects identified by the administrator under Sec. 733 through an approved international body, sectoral crediting mechanisms or international reduced deforestation as outlined in the CEJAPA, additional offset project types may be approved by the president if certain conditions are met (Sec. 744, p. 564). |
Sector-based credits |
Approves the issuance of offset credits from domestic sectoral crediting mechanisms as well as from sectoral crediting mechanisms in developing countries. (Sec. 743, p. 806). |
Same as ACESA |
Recognition of other programs |
Other programs can be recognized by the Administrator as long as those credits were generated through a program that creates equal or greater assurance of the environmental integrity of the U.S. program. (Sec. 743, p. 810). |
Same as ACESA |
REDD |
REDD credits are allowed only if the activity occurs in a country identified by the Administrator pursuant to their ability to participate in such a program according to specific criteria as established by this Act. Offset credits can be issued relative to a national, sub-national, or activity basis (in certain instances) (Sec. 743, p. 811). |
Same as ACESA CEPA: Elaborates on early offset supply rules from international REDD projects. |
The Senate Committees are: Foreign Affairs, Environment & Public Works, Finance, Agriculture, Energy and Natural Resources
Larsen, J., A. Kelly, et al. (2009a). WRI Summary of S. 1733, the Clean Energy Jobs and American Power Act (Kerry-Boxer) - 10/30/09. Washington D.C., World Resources Institute
Larsen, J., A. Kelly, et al. (2009b). WRI Summary of H.R. 2454, the American Clean Energy and Security Act (Waxman-Markey) Washington D.C., World Resources Institute
Term offsets are temporary offsets from bio-sequestration projects.
International versus Domestic Offsets: "In years when this provision triggers, an additional amount of international offsets are allowed equal to the lesser of: 1 GtCO2e less the actual amount of domestic offsets used; or 0.5 GtCO2e. This has the potential in later years to allow more than 2 GtCO2e of offsets into the system, so our interpretation is that the actual amount of extra international offsets allowed would be equal to the lesser of the amount calculated above, or 2 GtCO2e less the sum of the international offsets limit and the actual usage of domestic offsets. Because the pro-rata sharing limits domestic offsets in the early years to well below 0.9 GtCO2e, this provision will automatically trigger, even if the actual limit on domestic offsets were binding." (From: Pew Center, At a Glance American Clean Energy and Security Act of 2009