Offsets Under California s Cap-and-Trade Program

Transcription

1 Offsets Under California s Cap-and-Trade Program International Workshop on Domestic Offset Schemes Zurich September 26, 2013 Derik Broekhoff Climate Action Reserve

2 California Cap-and-Trade State-wide cap on GHG emissions Program began in 2013 and runs through 2020 Three compliance periods Compliance Period Coverage Large industrial emitters only % of economy-wide emissions (including transportation fuels & natural gas distribution) 2

3 Carbon Offsets Up to 8% of compliance obligation can be fulfilled with offsets Compliance Period First (narrow scope) Second (broad scope) Third (broad Scope) Year Allowance Budget (mt CO 2 e)* ,800, ,700, ,500, ,400, ,400, ,300, ,300, ,200,000 Max Offset Demand (8%) 26,800,000 91,784,000 83,104,000 3

4 Unique Features of California s Offset Program Top-down, standardized protocols Domestic focus Use of California regulatory baseline for determining eligible reductions Extensive early action program Delegation of program administration to thirdparty registries Credit invalidation risk ( buyer liability policy) 4

5 Top-Down Approach Offsets must come from projects registered under regulator-approved protocols (methodologies) California Air Resources Board (ARB) adopts protocols in regulation No formal process for submitting new bottom-up methodologies Currently U.S. domestic projects only 5

6 Standardized Methods Additionality determined using performance standards and other defined eligibility conditions Baselines and quantification based on standard assumptions and factors to the extent feasible 6

7 Eligible Reductions Offset reductions must fall outside the California (and Quebec) cap No offsets for reduced or avoided fossil emissions (e.g., renewable energy or energy efficiency), even though these opportunities exist in other states Emissions that are regulated (but not capped) in California may also not be eligible e.g., Landfill methane Inverse is not true, e.g., if activity is required in another jurisdiction but not in California, it is not eligible for offset credits 7

8 Current Eligible Project Types 1. Forestry Reforestation Improved Forest Management Avoided Conversion 2. Urban Forestry 3. Destruction of ozone-depleting substances (U.S.-sourced) 4. Livestock methane capture & destruction Mine Methane and Rice Cultivation Under Consideration 8

9 Early Action Offsets The Climate Action Reserve (CAR) Chartered by California law in 2001 (originally the California Climate Action Registry ) Mission to encourage voluntary actions to reduce emissions and to have such emissions reductions recognized under future regulation In 2008, renamed to focus on creating a North American carbon offsets program With support of the California Air Resources Board (ARB), developed series of standardized offset protocols 9

10 CAR Protocols Forestry (Reforestation, Improved Forest Management, Avoided Conversion) Urban Forestry Livestock Methane Capture Compliance Eligible Ozone Depleting Substances (US) Coal Mine Methane Rice Cultivation Under Consideration Agricultural Nitrogen Management Landfill Gas Capture Organic Waste Digestion Organic Waste Composting Nitric Acid Production International: Mexico Livestock and Landfill; Article 5 ODS 10

11 CAR Statistics CRTs registered 40.5 million Compliance-Eligible CRTs registered 16 million CRTs retired 7.5 million (~ 18%) Account holders 325 Projects submitted Registered Completed 22 U.S. States with Projects 45 11

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13 CAR s Role as Offset Project Registry Climate Action Reserve is now accredited by ARB as an Offset Project Registry (OPR) OPRs support ARB in the implementation of the cap and trade program by reviewing projects and issuing Early Action Offset Credits and Registry Offset Credits CAR Protocols / Early Action Offset Credits (CRTs) CAR Verifiers ARB Protocols / Registry Offset Credits ARB Verifiers Both may be converted to ARB Offset Credits, which can be used for compliance 13

14 Invalidation Risk & Buyer Liability ARB may find that an offset is invalid if, subsequent to issuance, it discovers: Significant errors in accounting Legal violations Double-counting of reductions If found invalid, CARB will remove the offsets from the account where they are currently located, whether active or retired If invalidated credits were retired, they must be replaced by the owner of the retirement account 14

15 Pricing for California Compliance Instruments Prices $16 $14 $12 $10 $8 $6 $4 $2 $0 Source: BGC Environmental Brokerage Services 15

16 Offset Credit Projections 16

17 Looking Forward New offset project categories Mine methane Rice methane Agricultural nitrogen management? Other agriculture sector activities? International Offsets? REDD+ Other international offsets? 17