If all foreign offset provisions in the Waxman-Markey climate bill are used, the cap and trade regime would spend nearly three times more money overseas for carbon offset programs than it would invest in home-grown clean energy industries, technologies, and job creation.
Last week, our analysis showed that Waxman-Markey would, on average, invest between $6 to 9 billion annually in clean energy technology and energy efficiency between 2012-2025. These funds would be raised by auctioning a cumulative total of 8.4 billion emission allowances. This stands is contrast to the $41 billion in allowances that would be given to polluters each year, and it is far less than the $15 billion President Obama has promised for clean energy R&D.
But how do these clean energy investments stack up against Waxman-Markey's spending on international offsets? The bill would allow polluting firms in the U.S. to finance emissions reductions overseas instead of reducing their own global warming pollution. The number of U.S. emissions that could be covered by foreign offsets every year is one billion tons, however, if too few domestic offsets are available, this number could rise to 1.5 billion tons. Breakthrough Institute analysis shows this could allow U.S. emissions to rise through 2030.
If all 1.5 billion foreign offset provisions are used each year between 2012-2025, this adds up to a cumulative total of 21 billion emission allowances. That's 2.5 times times the allowances provided for clean energy during that period (8.4 billion). The table below compare allowances and potential funding under these scenarios, and the graph compares annual funding at an average allowance price of $15.
Whether or not these foreign emissions offsets would be legitimate -- and whether U.S. dollars would be used honestly and effectively overseas -- is beyond the scope of this post. However, it is worth quoting the famous study released last year by Stanford University on international offsets:
"between a third and two thirds" of emission offsets under the Clean Development Mechanism (CDM) -- set up under the Kyoto treaty to encourage emissions reductions in developing nations -- do not represent actual emission cuts."