Climate Bill Analysis, Part 2: Clean Energy R&D Investment May Be 30 Times Smaller than President Ob
May 18, 2009
[Updated 6/18/09 to more clearly explain and depict the potential banking of offsets.]
At the heart of the nearly thousand page long climate change and clean energy bill being debated in the U.S. House of Representatives this week is a "cap and trade" mechanism aimed at limiting greenhouse gas emissions that contribute to global warming.
However, a provision in the bill, known as the American Clean Energy and Security Act (H.R. 2454 or "ACES"), allows polluting firms in the U.S. to finance emissions reductions overseas in lieu of reducing their own global warming pollution and may allow American emissions to continue to rise for up to twenty years, according to new analysis from the Breakthrough Institute.
The provision allows power plants, oil refiners, and other polluters regulated under the bill's cap and trade program to use up to one billion tons of international emissions reductions, or "offsets," to be used instead of reducing their own emissions each year. The bill also allows up to one billion tons of additional offsets each year, sourced from sectors of the U.S. economy that do not fall under the pollution cap, such as forestry and agriculture. If a suitable supply of domestic emissions offsets are unavailable, the limit on the use of international offsets may be raised to 1.5 billion tons annually at the discretion of the Administrator of the U.S. Environmental Protection Agency (EPA).
The extensive use of these international and domestic offsets would effectively allow U.S. firms in capped sectors to continue emitting global warming pollution at levels well above the reductions supposedly driven by the emissions cap. New analysis from the Breakthrough Institute reveals that if fully utilized, the offset provisions in the ACES bill would allow continued business as usual growth in U.S. greenhouse gas emissions until 2030. Emissions in supposedly sectors of the economy supposedly "capped" by ACES could continue to grow at BAU rates until as late as 2037.
While the bill intends to reduce economy-wide U.S. greenhouse gas emissions 20% below historic 2005 levels by 2020, 42% by 2030 and 83% by 2050, analysis from the Breakthrough Institute illustrate how the use of offsets would actually allow U.S. emissions to continue to grow at business as usual rates for years or even decades ahead.
The following graphics illustrate the effect of the offset provisions. Click any of them to enlarge.
The first graphic illustrates total legally permitted emissions in sectors of the economy covered by the ACES cap and trade regulations if offsets are available at the full levels permitted by the legislation (up to 2 billion tons per year). As this graphic illustrates, offsets could create a major oversupply of emissions allowances during the first years or even decades of the cap and trade program. This oversupply would either collapse the market value of emissions allowances or allow significant quantities of emissions permits to be banked for future compliance years (ACES allows unlimited banking of unused allowances) -- or both.