In curbing global warming, the devil is in the offsets

As lawmakers craft global warming legislation, one question they will have to settle is what should qualify as an offset to carbon dioxide and other greenhouse gas emissions.

The definition holds significant financial consequences for both industries and agriculture — one estimate puts the potential windfall of a vibrant offset market at $8 billion a year for farmers — and the issue is likely to be lobbied on heavily as the climate-change debate progresses on Capitol Hill.

Simply defined, an offset is an effort to cancel out greenhouse gas emissions. Planting trees is one activity likely to qualify because trees remove carbon dioxide from the atmosphere.

Supporters view offsets as a temporary fix until technologies that can capture and store carbon and other greenhouse gas emissions at the smokestack are more readily available.

“It is a way to buy time,” said Debbie Reed, a lobbyist for the Consortium for Agriculture Soils Mitigation of Greenhouse Gases, a group of universities and Energy Department laboratories.

The consortium is one of several groups that are lobbying to ensure that soil conservation and other climate-friendly techniques used by farmers are identified as greenhouse gas offsets.

Like trees, soil captures carbon from the atmosphere, and Reed’s group wants to ensure that agriculture gets full credit for soil as an offset.

Allison Specht, director of congressional relations at the American Farm Bureau Federation, said her group is also “closely watching” the climate debate on Capitol Hill.

“We want unlimited access to an offset market for agriculture and forestry,” Specht said.
But environmental groups are concerned that widespread use of offsets will delay actual emission cuts, and that advertised effects of offset programs will not be realized.

“Any inclusion of offsets has to have utmost security and scrutiny that the offsets are additional, permanent and enforceable — that they actually meet the savings they say they will,” said Dave Hamilton, a climate specialist at the Sierra Club. He added it is often tough to verify just how much carbon dioxide an offset takes out of the atmosphere.
“Of all the areas of global warming legislation, this is potentially the weakest in terms of verification,” Hamilton said.
Offsets could be used in a cap-and-trade program in which utilities and other industries can sell credits on the open market if they release less greenhouse gases than their allotted amount. Utilities that exceed their limit could purchase those credits without facing an additional financial penalty.

Agriculture is not likely to fall under the parameters of a cap-and-trade program. But farmers who adopt climate-friendly practices, like methane-capture technologies, no-till farming or carbon-absorbing grasslands, could still sell offset credits on the market to utilities, for example.

In Europe, lobbying by environmental groups has kept agriculture offsets out of the European carbon cap-and-trade system. But in the U.S., a voluntary domestic carbon market, the Chicago Climate Exchange, allows these types of offsets.

A few farmers are already trading on that exchange. Dale Enerson, the director of the National Farmers Union carbon credit program, said a total of 2 million acres of farmland now receive some offset credit on the exchange.

As a voluntary exchange, demand for carbon credits is fairly low, and so is the price of an offset credit. The financial benefit is around $2 an acre, Enerson said.

A mandatory cap-and-trade program is likely to raise significantly the price for carbon credits, which is one reason agriculture groups favor a cap-and-trade program rather than a carbon tax. Some economists, in contrast, believe such a tax, rather than an offset program, would be the most effective way to reduce greenhouse gas emissions.

Environmental Defense, one of a few environmental groups that support offsets, believes the market for agricultural offsets could reach $8 billion a year, which would make carbon allowance the fourth most lucrative farm “crop.”
The debate over offsets does not relate solely to agriculture. Industries are increasingly interested in establishing offset programs as well. Carbon offsets generally offer a cheaper way for industries to meet emissions allowances than direct emissions cuts.

Delta Airlines yesterday announced a program in which ticket purchasers could direct $5 to a domestic flight or $11 to an international flight for the planting of trees to offset the carbon emitted by their travel.

Covanta Energy, a company that uses waste to make electricity, is one company that is actively lobbying Congress to be included as an offset. Its plants emit carbon dioxide. But the more waste it uses, the less waste goes to a landfill. And that means that less methane, a much more potent warming agent than carbon dioxide, is emitted in the atmosphere.
Covanta’s plants are a “net reducer” of greenhouse gases, said Derek Porter, a spokesman for the company.

“We believe we should be allowed to sell greenhouse gas credits because we avoid greenhouse gas emissions continuously,” Porter said.

A global warming bill is likely to limit how much companies can rely on purchasing offsets to meet their emission allowances. Environmental groups want any offset program to include hard emissions cuts as well.

“The idea of selling a ton for a ton loses its credibility,” said Jeremy Symons of the National Wildlife Federation. “It’s like counting calories and trading off a cupcake for a bowl of ice cream.”