In 2008, EPRI launched the EPRI Greenhouse Gas (GHG) Emissions Offset Policy Dialogue project. The goals of this project are to inform key constituencies involved in the development of U.S. climate mitigation strategies and policies about GHG emissions offset-related policies and design issues, and to provide a forum in which representatives of key sectors of the U.S. economy and communities involved in the ongoing development and debate on climate change policies can discuss these issues.
This Technical Update summarizes work conducted by EPRI in 2008 on this project and remaining work to be completed in 2009. EPRI anticipates publishing a final project report in 2009 that identifies, describes and assesses key elements of GHG emissions offset programs and their potential impacts on stimulating investments in offset projects while maintaining the environmental integrity of GHG cap-and-trade systems.
This EPRI Technical Update provides senior managers and environmental staff of U.S. electric companies and others with a comprehensive understanding of the potentially important role that GHG emissions offsets (“offsets”) may play in reducing the costs of complying with requirements to reduce GHG emissions that contribute to global climate change.
The key goals of the EPRI GHG Emissions Offset Policy Dialogue include:
- Informing key constituencies – including the policy-making, environmental, industrial, financial and research communities – regarding the performance of existing offset programs;
- Providing a forum in which representatives from the communities identified above can discuss important design elements that may be incorporated in possible future offset policies;
- Building a common understanding of how key design elements will affect whether an offset system is likely to achieve environmental integrity while simultaneously facilitating investment in activities that create large-scale GHG emissions reductions; and,
- Discussing potential mechanisms that may help to reduce various risks that have made it difficult to mobilize capital to develop offset projects.
This EPRI project has used a “lessons-learned” approach to identify, describe, and assess the impacts of design elements incorporated in existing and proposed offset systems, and which significantly impact their ability to achieve environmental and economic objectives.
To achieve the project’s goals and explore the myriad of design issues related to the development of offset programs, EPRI hosted a series of three interactive offset workshops in 2008. Participants in these workshops included staff of EPRI member electric companies as well as a wide range of individuals that represent other economic sectors and organizations involved in the development and implementation of offsets and offset policy.
This report provides a summary and compilation of work undertaken by EPRI in 2008 on this project. It incorporates background materials developed by EPRI and Natsource Advisory and Research for three related workshops held in 2008. This report also includes a summary of the discussions that took place at each of these EPRI-sponsored events.
Application, Value and Use
While debate continues regionally, nationally and internationally about how to respond to global climate change, it is becoming increasingly clear that U.S. electric companies may face future requirements to substantially reduce and/or offset their GHG emissions.
The extent to which domestic and international offsets may be used to comply with emission reduction requirements that may be incorporated in evolving GHG cap-and-trade programs has become increasingly controversial in the U.S. as policy makers seek to design climate change policies.
In addition to the potential economic benefits that GHG offsets may offer, well designed offset programs also may provide additional benefits including: (1) stimulating innovation and emission reductions in economic sectors not subject to emission reduction requirements in cap and trade programs; (2) enabling development and deployment of technologies in the U.S. that will be critical to achieving long-term climate policy objectives; (3) rewarding innovative entrepreneurs who develop effective approaches to reduce GHG emissions; and, (4) spurring diffusion of new technologies around the world.
This report provides a comprehensive overview of existing GHG offset systems, key design elements, and their performance. It also explores design alternatives being considered for offset programs that may be incorporated in climate change policies under development.
Finally, this report describes alternative approaches that potentially can be developed to enable offset programs to achieve environmental and economic objectives.
EPRI member companies have a significant interest in the potential role GHG emissions offsets may play in climate change policy. Over the past decade EPRI members have supported fundamental research and development activities related to evaluating and implementing GHG offsets such as forest carbon sequestration and nitrous-oxide (N2O) emissions reductions associated with altered crop production practices in agriculture.
As climate policy continues to evolve at the state, regional, and federal levels in the U.S., electric companies will need to play a key part in helping to define evolving offset policies, and the role that offsets will play in climate policy.
This report is designed to provide EPRI members and others with a comprehensive understanding of the key design issues that must be addressed in developing a robust offset program as part of more comprehensive efforts to reduce U.S. GHG emissions. We are hopeful that this improved understanding will lead to more thoughtful and productive public policy deliberations regarding these important issues.