International Offsets and U.S. Climate Legislation

Environmental Law Report, Vol. 40 pp.10610

July 1, 2010

By Kyle Danish and Megan Ceronsky

There are strong drivers supporting the integration of international offsets into U.S. climate legislation, including the dramatic cost savings they promise, and their role in promoting action by other countries.  What remains uncertain (beyond the timing of U.S. legislation) are the conditions under which international offsets will be utilized, and any quantitative limits on use.  An international offsets program constrained by impossible-to-meet criteria or with mechanics that generate high levels of market uncertainty may not differ significantly from a domestic-only offsets program.  For these reasons, there is work left to be done to further educate policy makers about the benefits of international offsets and the necessary elements of a functional international offsets program. 

The year 2009 was the first year that a chamber of the U.S. Congress voted in favor of regulating greenhouse gas emissions. In late June, the U.S. House of Representatives passed H.R. 2454, the American Clean Energy Security Act of 2009  (Waxman-Markey), an energy and climate package including an economy-wide cap-and-trade program.

Action then shifted to the Senate, where Senators Barbara Boxer (D-CA) and John Kerry (D-MA) introduced S.1733, the Clean Energy Jobs and American Power Act (Kerry-Boxer). Although their bill passed out of Senator Boxer’s Environment and Public Works Committee, it has been roundly criticized by Republicans and moderate Democrats, and has been overshadowed by efforts to  create a compromise climate change legislative package led by Senators John Kerry, Lindsey Graham (R-SC), and Joe Lieberman (I-CT). During the final months of 2009 and the beginning of 2010, consideration of climate change legislation in the Senate took a backseat to efforts to pass health care and financial reform legislation. As we write this article, the politics of immigration reform have threatened to arrest development of a comprehensive climate-energy bill in the Senate. As the 2010 midterm elections draw ever nearer, the likelihood that the Senate will take a difficult vote, such as on a climate bill, grows smaller. Nonetheless, efforts to craft a bill that can garner the magical number of Senate votes – sixty are needed to overcome procedural opposition by Republicans – continue, if perhaps not apace. And, in any event, even if legislation does not pass in 2010, the deliberations that occur on international offsets this year will be important because each new effort in the U.S. Congress has built substantially on previous efforts.

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This article appeared in Chapter 2 of the Reprinted with the permission of the International Emissions Trading Association's IETA 2010 Greenhouse Gas Market Report.