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Product Abstract

Key Institutional Design Considerations and Resources Required to Develop a Federal Greenhouse Gas Offsets Program in the United Sta tes

Product ID:1023122
Date Published:25-May-2011
Sector Name:Environment
Document Type:Technical Results
Price:No Charge

This Product is publicly available

   1.69 MB - Adobe PDF (.pdf)

Greenhouse gas (GHG) emissions offsets have emerged as a critical element of evolving U.S. climate policy and a critical factor in determining the future price of CO2 emissions and the economic costs of proposed policies. This report evaluates the governmental institutional requirements and resources needed to develop a large-scale national domestic GHG emissions offset program. It also describes potential institutional barriers that might limit the ability of the evolving carbon market to generate significant offset supplies in the United States, both in the near term as companies that emit GHG develop and deploy large-scale emission reduction technologies and in the long term for overall cost containment. Proposed alternative approaches to addressing these institutional barriers also are discussed. This Electric Power Research Institute (EPRI) report is one of several key project deliverables developed as part of an EPRI supplemental project, Improving GHG Emission Offset Supply Estimates.


This report is designed to evaluate the governmental institutional requirements and potential resources (that is, financial and staff) needed for the federal government to develop and implement a large-scale national domestic GHG emissions offset program. It also identifies near-term institutional barriers that could curtail the availability of domestic and international GHG emission offsets and provides alternatives for consideration that could address these barriers and improve the potential for a U.S. national GHG offsets program to create large quantities of emissions reductions.


This EPRI project uses a "lessons-learned" approach to identify, describe, and assess potential institutional design requirements and resources needed to develop and implement a large-scale domestic national GHG emissions offsets program. This report explores in depth the institutional design of the world's largest existing GHG offsets program—the United Nations' Clean Development Mechanism (CDM)—and attempts to identify lessons learned from the implementation of CDM that might help inform the future development of a U.S. offsets program. This report also uses a "scenario analysis" approach to estimate the resource requirements for the federal government to develop and implement a national GHG offsets program. The project team developed two potential policy scenarios (a legislative scenario and a Clean Air Act regulatory scenario) that lead to two different estimates of the potential resources needed to develop a large-scale national GHG emissions offsets program starting in 2015.


This report addresses key questions related to the potential future design of institutions necessary to support the development of projects that can deliver large quantities of GHG emissions offsets that could be used by electric companies and other entities that might face mandatory requirements to reduce their GHG emissions. Key questions include:
  1. What are the programmatic "nuts and bolts" required to administer and credit offsets for a domestic market?
  2. What kinds of institutions are required to deliver offsets to a U.S. market?
  3. How might different rules and programmatic designs affect the burdens on program administrators and market participants and the amount of expected offset credits to be issued and associated transactions costs?

Application, Value and Use

Although debate continues regionally, nationally, and internationally about how to respond to global climate change, it is becoming increasingly clear that U.S. electric companies might face future requirements to substantially reduce and/or offset their GHG emissions. Existing and proposed policies for limiting GHG emissions in the United States and around the world have included market-based approaches that have given companies the flexibility to comply using a variety of activities. Although the adoption of a federal market-based system seemed almost inevitable a year ago, it now seems almost impossible in the near term. However, the value of market-based approaches is being demonstrated in many jurisdictions, and such approaches remain a prominent policy option for the United States to pursue in the longer term. This report will help companies understand how large-scale GHG emissions offsets programs have been developed in the international context and the potential institutional and resources requirements that will be required to develop a large-scale national GHG offsets program in the United States.

This report identifies and describes key institutional processes, data, and decision-support processes that might need to be developed and implemented by one or more federal regulatory agencies that might be tasked with developing a compliance-quality U.S. national and/or regional GHG emissions offsets program(s). This report offers senior managers and environmental staff of U.S. electric companies and other interested parties a comprehensive understanding of the institutional design issues that must be addressed as part of the future development of a large-scale U.S. GHG emissions offsets progam. This report also provides electric company managers with information on approaching compliance with future GHG reduction mandates at the state and local, regional, and federal levels.

EPRI Perspective

EPRI-member companies have a significant interest in the potential role of GHG emissions offsets in climate change policy. Economic modeling of climate legislation concludes that offsets would be a key compliance instrument and an important source of cost containment. Offsets reduce compliance costs because they increase the supply of abatement options available to meet a given compliance obligation. To date, no one has attempted to evaluate the institutional process that might need to be developed and implemented by the federal government or the financial and staff resources to be deployed to create a large-scale domestic national GHG emissions offsets program. As climate policy continues to evolve at U.S. state, regional, and federal levels, electric companies will need to play a key part in helping to define evolving offsets policy and the role that offsets will play in climate policy. This report is part of EPRI's ongoing efforts to provide timely offset-related information, data, quantitative modeling, and critical analyses to help inform policy and regulatory development.
2011 Program 103   Analysis of Environmental Policy Design, Implementation and Company Strategy
  • Climate Change
  • Carbon market
  • Greenhouse gas
  • GHG emissions
  • Offsets
  • Clean Development Mechanism

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