Sheldon Zakreski, The Climate Trust
Weekly Policy and Finance Update – March 27, 2018
| California’s attempts to encourage in-state projects through a state direct environmental benefit standard is not as easy to implement as it seems. The state would do well to interpret this criterion broadly. |
When California’s legislature extended its cap and trade program last summer it mandated that a certain share of offsets produce “direct environmental benefits” (DEBs) to the state. This was done as a nod to environmental justice advocates who argued offset projects occurring outside of the state had little benefit for Californians. This is despite the fact that science tells us that carbon emission reductions benefit the entire planet regardless of where they occur on earth.
The legislature left it to the program’s regulator, the Air Resources Board, to figure out how to interpret DEBs. The early signs are encouraging because there are strong cases to be made that offsets being generated several states away directly benefit California’s environment. Consider ozone depleting substances, which are collected in California, but often destroyed in Arkansas. Additionally, Colorado State forestry or dairy methane digester projects that enhance the water quality of the Colorado River, a major source of water for California, also seem to directly benefit California’s environment. These are but a few examples where DEBs arguably transcend conventional thought on project location.
A broad interpretation of DEBs also has economic benefits for California. The American Carbon Registry hired the research firm CaliforniaCarbon.info to assess the impacts of a DEBs requirement on future offset supplies. The study found that shifting from the current offset usage structure to a lower ceiling and DEBs requirement could lead to compliance entities needing to purchase up to an additional 312 hundred million allowances at the price ceiling in the 2020s. It’s difficult to say the price differential between offsets and allowances several years out, but a narrow interpretation of DEBs could cost Californians tens of billions of dollars in additional compliance costs with no discernible climate benefits and unclear air and water quality benefits for the state.
| An Impact Analysis of AB 398 on California’s Cap-and-Trade Market CaliforniaCarbon.info, prepared for American Carbon Registry, July 2017 |
| Carbon Offsets Really Do Help Lower Emissions Debra Kahn, Climate Wire, August 15, 2017 |
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Image credit: Flickr/Mark Jensen
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