Steve Valk's Open Salon Blog

As Cap and Trade Dies, Let's Bury Offsets With It

Sat, 24 Jul 2010 03:07:17 -0400

Senate Democrats pulled the plug on climate legislation Thursday, but it's not the end of the world. In fact, the demise of cap-and-trade might be the best thing that could happen for the Earth's climate.

Although the proposal from Senators John Kerry (D-MA) and Joe Lieberman (I-CT) was watered down and industry-friendly, the argument was made that we needed to take steps now, no matter how small, to stop climate change. Whatever the flaws or shortcomings, we could fix them later.

Some flaws, however, are not fixable. And that was the case with the little-talked-about provision in cap-and-trade legislation - greenhouse gas offsets.

Greenhouse gas offsets -- also known as carbon offsets -- allow polluters to exceed their emissions cap by helping to finance projects that reduce greenhouse gas emissions somewhere else.

Sounds reasonable, right? After all, it's one big atmosphere, so what's the difference if reductions are made in one place or another?

Here's the problem: In order for offsets to really work, the emissions reductions they achieve have to go beyond what is legally required. They also have to be "additional," meaning it must be shown that those reductions wouldn't have happened without the financial incentive provided by the offset purchaser. If a project that reduces greenhouse gases would have happened in the course of "business-as-usual," it is not considered additional. Any offset purchase for such projects would produce no net reductions.

The trick, obviously, comes in establishing the additionality of an offset. In most instances, this is difficult, if not impossible, to prove.

But don't take my word on this. Laurie Williams and Allan Zabel, two attorneys for the Environmental Protection Agency based in San Francisco, just issued a whistleblower disclosure calling on Congress to investigate the unfixable flaws of greenhouse gas offsets in proposed climate legislation.

It must be noted that this disclosure by Williams and Zabel is their own opinion and isn't intended to represent the views of the EPA or the Obama Administration. That said, they each have more than 20 years working with the EPA, giving them a high level of experience with offsets and environmental enforcement issues. They know what they're talking about, and their alarm over offsets is so great that they produced a video last fall -- "The Huge Mistake" -- detailing the major flaws of the climate bills being considered in Congress. Most of that information was also presented in a Washington Post oped.

In their paper, Williams and Zabel list four unfixable flaws with GHG offsets:

1. Business-as-Usual is Not Distinguishable -- It is impossible to determine whether a particular project would not have happened but for the additional incentive provided by the offset payments (i.e., would not have â€• happened anyway).
2. Activity Shifting (also called "Leakage") -- Emissions allegedly reduced by the project may simply be shifted elsewhere and there is no feasible way to track this.

3. Perverse Incentives to Keep Polluting Activities Legal -- The dual pressures to maintain offset profits and to keep the price of GHG offsets low will increase political pressure against the development of new regulations to limit polluting activities.

4. Subjectivity/Complexity/Uncertainty -- Subjective factors, along with complex and uncertain emissions calculations, are used to determine the baseline emissions and the allegedly additional reductions from GHG offsets. Along with the other unfixable flaws, subjectivity, complexity and uncertainty make enforcing additionality impossible

The 22-page disclosure goes on to explain, in much detail, each of these flaws, citing EPA protocols and examples. Worth the read for anyone concerned with getting things right -- I didn't say perfect -- on climate solutions. Certainly worth the read for members of Congress and their staff who are responsible for enacting effective legislation to address climate change.

Does the demise of climate legislation this year make discussion of offsets moot? I'd like to think so, but there's no guarantee that offsets won't re-emerge in future climate legislation. Polluters love the easy way out provided by offsets, which are usually cheaper for companies than reducing their own emissions. Alarmingly, proposals in this Congress would have allowed for 2 billion tons of GHG reductions to be provided by offsets. This means that all reductions for the next 20 years could be accounted for in a system thoroughly lacking integrity, one that allows American polluters to go about business as usual without making their own reductions. Corporate lobbyists will be working overtime to ensure that offsets are part of any future climate solution.

The best-case scenario for the next Congress would be legislation that places a steadily-increasing fee on carbon, returning the revenue from that fee to the American people. No carbon trading. No offsets. The "carbon dividend" from this fee would provide an offset of a different sort, one that shields families from the impact of rising energy costs associated with phasing out fossil fuels.

However, if any legislation emerges with GHG offsets, Congress must honor the request of Williams and Zabel for an investigation. There's simply too much riding on this to institute a phony system that fails to reverse the destructive course humanity has set.

K-G-L and the Shell Game Known as Carbon Offsets

Thu, 22 Apr 2010 13:04:24 -0400

As details emerge about the long-awaited climate bill from senators John Kerry, Lindsey Graham and Joe Lieberman, I find it increasingly easier to contain my enthusiasm for their proposal.

The latest disappointing news is that Kerry plans to drop the tax on transportation fuels. This leaves utilities as the only sector immediately covered in their emissions-reduction strategy, a sector that accounts for 40 percent of the carbon dioxide the U.S. emits each year.

Given that electricity producers burn most of the coal extracted from decapitated mountains, this might seem like a decent first step. But the other devil in the details emerging on K-G-L is that carbon offsets will figure prominently in the new legislation. Instead of actually reducing CO2 emissions or purchasing permits to keep coal fires burning, polluters will have the much cheaper option of helping to finance projects in developing countries that supposedly lead to an equivalent reduction in CO2.

Sounds good in theory, but in practice carbon offsets are an illusion. Or, as Friends of the Earth labeled them in an excellent report last fall, “A Dangerous Distraction.”

As we weigh the pluses and minuses of the forthcoming K-G-L bill, the minuses pile up fast. This is a good time to revisit the FoE report, which dispels any notion that offsets are a viable strategy for reducing CO2. Be warned, when you finish reading their critique, you’ll needed an ibuprofen to relieve the soreness in the muscles that raise your eyebrows.

In the final hours of negotiations for the Kyoto Protocol in 1997, developed nations worried they wouldn’t be able to achieve their emissions reductions targets. They needed an escape hatch, something other than actually reducing CO2 emissions in their own countries. Thus was born carbon offsets and the creation of the United Nations Clean Development Mechanism (CDM).

Through the CDM, polluters purchase certified emission reductions (CERs) in poorer nations, investing in projects that would curb carbon in the future. To qualify for CDM funding, a project has to prove it is additional, that the project wouldn’t have happened anyway. In other words, a project asserts that it couldn’t be constructed without CDM assistance. As FoE reported, many projects qualify despite the inability to prove they are additional.

From “A Dangerous Distraction”:

International Rivers cites the example of the Xiaogushan, Gansu, hydro project: A 2003 Asian Development Bank report on the project said it was the cheapest option for expanding generation in Gansu, regardless of CDM revenue, and a priority for the local and provincial government. Yet in 2006, two years after construction started, the developers claimed that without CDM support it was too risky “to reach financial closure and […] commence the project construction.” It was CDM-approved in August 2006.

In some instances, the Clean Development Mechanism should be renamed the Less Dirty Development Mechanism. In 2007, the CDM ruled that new electric plants that burn coal more efficiently – and therefore emit less CO2 than older plants – could receive funding and qualify as CERs. Regarding a 4 gigawatt coal-fired complex in India, the FoE report quotes David Wheeler, Senior Fellow at the Center for Global Development:

“Instead of supporting critical zero-emissions energy investments, scarce international resources are sweetening a private sector project that will emit over 700 million tons of CO2 during its operating life.”

By their very nature, offsets provide no real reductions in global carbon emissions because they’re based on what might happen in the future, not what’s happening now. English journalist Dan Welch, quoted by International Rivers, sums it up succinctly by saying, “Offsets are an imaginary commodity created by deducting what you hope happens from what you guess would have happened.”

By giving utilities the option of purchasing cheap offsets, we would delay, by precious decades, America’s conversion to clean energy. Polluters would simply keep burning coal as long as offsets are available for a fraction of the cost of low-carbon power.

Looking over the details of the Kerry-Graham-Lieberman proposal, as reported by Reuters, there are many more reasons for concern – stripping EPA authority on greenhouse gases, more offshore oil and gas drilling, for example. But carbon offsets are truly the fatal flaw in this scheme, and if the K-G-L climate bill is the only train that’s leaving the station right now, we’re better off waiting for the next train.

Steve Valk is communications director and regional manager for Citizens Climate Lobby.

Why carbon caps don't work and other mysteries explained

Wed, 7 Apr 2010 11:04:09 -0400

By Steve Valk

When policy wonks start talking about carbon pricing, it’s difficult for mere mortals to follow the conversation. There’s a dizzying array of options – cap and trade, cap and dividend, fee and dividend. How do these various systems work and which one is most effective?

Last Saturday, members of Citizens Climate Lobby had the benefit of picking one of the best brains on this issue – economist Robert Shapiro, who was Undersecretary of Commerce for Economics during the Clinton Administration. You can listen to the conference call with Shapiro here.

Shapiro now chairs the U.S. Climate Task Force, and for several years he’s advocated for a carbon tax – or fee, if you prefer – to put a price on fossil fuels that will make clean energy competitive. He explained, more clearly and convincingly than anyone I’ve heard, why the fee and dividend approach would work better than cap and trade.

Before I get into that, some folks may be wondering why we’re still talking about cap and trade. Didn’t congressional leaders declare cap and trade was dead and they were coming up with a new plan on climate legislation?

Well, the phrase “cap and trade” may have been stricken from the climate change lexicon, but the system of buying and selling permits to emit carbon-dioxide is still very much on the table. The proposal in the works from senators John Kerry, Lindsey Graham and Joe Lieberman would employ such a permitting system in the utilities sector. I assume the reason it’s taken so long to draft their legislation is because they’re having a hard time coming up with another name for cap and trade.

Back to Shapiro and the cap and trade vs. fee and dividend debate.

“Cap and trade,” as Shapiro explains, “is a quantity-based regulatory regime. You’re going to control something by controlling its quantity.”

This would be the cap, which on the surface sounds good. We want less CO2. Therefore, we set a limit on the amount of it we allow to be emitted. Right? The problem starts, however, when policy-makers attempt to determine the cap.

“The cap will be set with a set of assumptions about how much energy the country will consume in the year of the cap.”

And there are numerous factors, quite unpredictable, that will affect energy demand – economic growth, how cold the winter is, how hot the summer is. If the economy grows faster than anticipated or the winter is colder, energy demand will exceed what the cap allows.

“As energy demand bumps up against the cap… the price of the permits will soar. So what you get is price volatility in the permits, and that volatility is then transmitted through the permits to the price of energy,” said Shapiro.

“This is not only bad for the economy, to introduce this additional volatility into energy prices, but it’s also bad for the environment. The reason is that the only way we’re going to succeed in containing the damage from global warming is through the development of new technologies and new fuels. The ones we have today will not be sufficient… We have to go beyond that and produce new forms of energy which are not only climate-friendly but cheaper than the ones we have today. And to do that, for businesses to undertake the sustained investments required to develop these technologies and these fuels, they have to know what the price of carbon is going to be.”

If a predictable price on carbon is the driving force for investments in clean energy, as Shapiro argues, then a direct fee or tax applied to carbon is the way to go. Eliminate the volatility, and investors will open their wallets.

The other great advantage of a fee and dividend system is the recycling of the revenue back to the people.

“The hardest thing to do in politics is to get people to accept a short-term cost in order to avoid a larger long-term cost… Cap and trade in the House tried to deal with this by trying to reduce the short-term costs at the cost of the environmental effectiveness of the program. They gave all kinds of exemptions and offsets and they weakened the environmental center of the program. A carbon-based tax can largely eliminate the short-term costs by recycling the revenues. After all, the goal of this is not to make people poorer. It’s to change the relative price of different forms of energy based on their impact on the climate. And that’s exactly what a carbon-based tax does.”

What about the Cantwell-Collins CLEAR Act? Their bill employs a cap and dividend approach that sets a limit on emissions, auctions off the permits and then recycles 75 percent of the revenue in the form of a monthly payment.

Shapiro labeled the CLEAR Act “cap and trade light.” Though CLEAR uses a price collar with a floor and a ceiling, there is still uncertainty in the price of carbon.

“First of all, it doesn’t eliminate the volatility. It limits it. The way it’s designed, the spread between the floor and the collar top would expand over time, so the volatility would increase. And the fact is, the only way to enforce a cap on the price would be to issue more permits, and then you have blown the cap, which is the only advantage of cap and trade.”

If Shapiro’s made a believer out of you for a carbon-based tax, check out CCL’s proposal for a Carbon Fee and Dividend Act. Everything’s on the table with climate legislation at this point, but we need to choose the solution that will actually work.

Steve Valk is communications director for Citizens Climate Lobby.

Pricing carbon: From tilting at windmills to building them

Mon, 29 Mar 2010 13:03:50 -0400

By Steve Valk

While it looks like the climate and energy bill from senators John Kerry, Lindsey Graham and Joe Lieberman won’t be released until mid-April at the earliest, Citizens Climate Lobby has a bill ready to go – The Carbon Fee and Dividend Act. Funny how quickly things can move when you’re not trying to get the blessing of the American Petroleum Institute.

Let’s face it: Any legislation that makes the fossil fuel industry happy probably won’t reduce carbon-dioxide to levels that are safe and sustainable. That’s why we didn’t ask the barons of carbon-based energy for input on our proposal. Instead, we turned to scientists like Dr. James Hansen for advice on the maximum safe level of CO2 our atmosphere should hold and how to go about reducing CO2 to that level.

His answers, laid out clearly and convincingly in his new book, “Storms of My Grandchildren,” are as follows:

We have to reduce CO2 levels from the current 389 parts per million to 350 ppm.
To achieve this, we must stop burning fossil fuels, transitioning as quickly as possible to clean energy by placing a predictable and steadily-increasing fee on carbon.

The experts inside the Washington Beltway will tell us that we’re being naïve and unrealistic to write legislation without cutting deals with the powerful fossil fuel lobby. They have obscene amounts of money to pour into public relations and political campaigns – not to mention a Supreme Court decision that allows them to break any member of Congress who goes against them. For decades they’ve funded think tanks that confuse the public about the science of climate change. Those experts will tell us we’re playing the part of Don Quixote tilting at electricity-generating wind mills and that no politician wants the thankless task of playing Sancho.

What gives us the gall to think we can defy such a powerful lobby?

Simply put, we wrote a bill that’s a good deal for the Earth and a good deal for the American people.

A good deal for the American people? If folks have to pay more for energy, how is that a good deal?

Actually, it’s a great deal, because we’re giving everybody the money that’s generated from the carbon fee. The revenue would be distributed equally to all households in the form of a monthly carbon dividend – hence the name Carbon Fee and Dividend Act. Those who make smart choices and investments in energy use will end up keeping more of the dividend than they will pay for increased energy costs.

Just how much money are we talking about? Quite a lot, as it turns out. Let’s do some basic math.

The fee, starting at $15 for each ton of CO2 generated by a particular fuel, would increase $10 each year. In ten years, when the fee has made clean energy cheaper than coal, the assessment will be $115 a ton. Assuming that CO2 emissions will be reduced by a third at this point, four billion tons of CO2 will be assessed the fee that year, generating $460 billion. Divide that by 300 million residents and you have a per-capita payout of about $1,500 a year. A family of four would get $6,000.

Any politician who can’t build support for a $6,000 rebate is a pretty poor salesman.

We’ve put together a proposal that is simple, transparent and effective. It’s based on legislation that has been introduced from both sides of the aisle -- Rep. John Larson’s (D-CT) America’s Energy Security Trust Fund Act (H.R. 1337), and Rep. Bob Inglis’ (R-SC) Raise Wages Cut Carbon Act (H.R. 2380).

In addition to putting a predictable price on carbon and returning revenue to all households, the Carbon Fee and Dividend Act would also:

Call for a halt to the permitting and construction of coal-fired power plants.
Place a fee on imports from countries that don’t have similar pricing mechanisms.
Phase out subsidies on all fossil fuels within five years.
Ensure that clean energy becomes competitive with fossil fuels within ten years.

In short, we wrote a bill we believe is a match for the science.

Now we have to create the political will to pass this legislation. It’s an uphill task, for sure, and our volunteers are already talking to their members of Congress to solicit their support.

We need your help, too. Take a look at our bill, and if you believe, as we do, that this is the most promising solution to the climate crisis, take action. Write to us (ccl@citizensclimatelobby.org) or give us a call us (619-437-7142), and we’ll give you the training and support you need to be an effective lobbyist for the Earth and our grandchildren’s future.

At this very moment, politicians are cutting deals with each other and with corporate America that will doom any effort on climate mitigation to failure. As we’ve already seen from retreating glaciers, the Earth’s climate is not in a deal-making mood. Washington needs to hear this message. If we can enact this legislation, we won’t be tilting at windmills. We’ll be building them.

Steve Valk is communications director for Citizens Climate Lobby.

Congress moves to block EPA authority on greenhouse gases

Tue, 23 Mar 2010 13:03:08 -0400

Although efforts to revive climate legislation are under way in the Senate, odds of enacting a bill to curb greenhouse gases remain quite long.

Not to worry, though. Didn’t the Obama administration say that in the absence of such legislation the Environmental Protection Agency would impose limits on carbon-dioxide and other greenhouse gases?

Don’t count on it.

The fossil-fuel lobby – which as spent more than $100 million to derail effective climate change policy – is no doubt delighted with two measures pending in the Senate that would prevent the EPA from regulating greenhouse gases.

We’ll start with the bad and move to the worse.

Earlier this month, West Virginia Democrat Jay Rockefeller IV introduced a bill (S. 3072) that places a two-year moratorium on the EPA’s authority to place new restrictions on utilities and industries that emit large quantities of CO2. The biggest sources of CO2 are utilities that burn coal. Little surprise, then, that a senator from West Virginia – one of the biggest coal producers – would author such a bill.

What’s interesting is that West Virginia’s other senator, Democrat Robert Byrd, has declined to support Rockefeller’s bill:

“I do not plan to co-sponsor Sen. Rockefeller’s legislation at this time. I was encouraged by the response last week from EPA Administrator Lisa Jackson… that [EPA] would delay until next year the application of stronger standards regarding increased efficiency or reduced pollution at large power plants and factories.”

Rockefeller’s bill – at least for the time being – has lowed momentum on a more onerous measure proposed by Sen. Lisa Murkowski (R-Alaska). Murkowski introduced a resolution of disapproval (S.J. Res. 26) that would nullify the EPA’s endangerment finding on greenhouse gases and permanently strip the EPA of its authority to regulate CO2. Unlike Rockefeller’s bill, Murkowski’s measure is permanent and would also stop the EPA from limiting all sources, including cars and trucks.

The decision by the EPA to move ahead on regulating GHGs is not some arbitrary power grab by the executive branch. In a 2007 decision, the Supreme Court ruled that the EPA had a mandate to regulate greenhouse gases as a pollutant. Last year the EPA initiated a scientific review, which concluded that CO2 and other greenhouse gases pose a threat to the health and welfare of the nation. With this endangerment finding, the EPA was obliged to develop new rules regulating GHGs, which were announced late last year.

EPA Administrator Jackson is the first to say that comprehensive climate legislation would be better, more effective and less costly. But in the absence of such legislation – with the clock still ticking on climate change – EPA regulation is the only backstop we have to apply the brakes on CO2 emissions and prevent a bad situation from getting worse. And the threat of EPA rules has provided a strong incentive for Congress to enact legislation. Should the EPA be stripped of this authority, that incentive vanishes and a signal is sent to the rest of the world that the U.S. will continue to drag its feet on climate change.

Citizens Climate Lobby is asking its members to contact their senators to oppose both the Rockefeller bill and the Murkowski resolution. You can join in this action by going here.

Should these measures in the Senate – and seven others like them in the House – be defeated, the pro-carbon lobby has another ace up its sleeve: Negotiations are happening, according to 1Sky, with senators John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman to gut the Clean Air Act in new legislation soon to be unveiled.

More about that next time.