- WEB EXCLUSIVE
- PE COFFEEHAUS
In an August 2008 report, the GAO identified four primary challenges related to the United States voluntary carbon offset market:
- The concept of a carbon offset is complicated because offsets can involve different activities, definitions, greenhouse gases, and timeframes for measurement
- 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.
- 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.
- 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.
According to GAO, the findings from these two reports illustrate how challenges in the voluntary offset market and the use of offsets for compliance may compromise the environmental integrity of mandatory programs to limit emissions and should be carefully evaluated. As a result of these challenges, GAO suggested that, as it considers legislation that allows the use of offsets for compliance, Congress may wish to consider, among other things, directing the establishment of clear rules about the types of projects that regulated entities can use as offsets, as well as procedures to account and compensate for the inherent uncertainty associated with offset projects. Further, GAO suggested that the Congress consider key lessons from the CDM, including the possibility that, (1) due to the tradeoffs involving cost savings and the credibility of offsets, their use in mandatory programs may be, at best, a temporary solution to achieving emissions reductions, and (2) the program's approval process may not be a cost-effective model for achieving emission reductions.