Opinion
Compliance offsets add real value to California

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OPINION – Major climate policy is currently being debated in the Legislature: California’s landmark Cap-and-Trade Program – specifically, it’s reauthorization. And, unlike back in 2017 with significant debate, this time, there is no question among policy makers around whether to extend the state’s groundbreaking and highly successful Cap-and-Trade Program. The Program has shown the world how an economy-wide carbon reduction regulation can cost-effectively meet ambitious state climate targets. In today’s debate, the defining question is ‘How best to keep the climate momentum going, in the most cost-effective manner?’. A significant piece of that answer is the continued use of California Carbon Compliance Offsets that provide significant cost savings, while guaranteeing real, permanent, quantifiable, and enforceable GHG reductions.
California Compliance Offsets have been in the Program from its inception, delivering on every policy goal assigned to them, including cost-containment and achieving additional GHG reductions outside the reach of regulators. Compliance Offsets have saved Californians over a quarter of a billion dollars in compliance costs to date, while producing over 265 million metric tons of climate change pollutant reductions. They have provided incentives for capital to invest in California’s natural and working lands, and have directly benefited Tribal, rural, and urban communities. And importantly, every Compliance Offset is third-party certified and verified as a real reduction before getting being approved for use by the California Air Resources Board (CARB), as required by the groundbreaking Global Warming Solutions Act of 2006, also known as AB 32.
As CARB extended the State’s climate regulation to achieve our new, more ambitious statewide climate goals for 2030, Compliance Offsets were a vital tool to meet the varied policy needs and statutory constraints established by the Legislature. And now today, as we look to set the rules for post-2030 to meet California’s 2045 carbon neutrality and Natural and Working Lands goals, Compliance Offsets should continue to play an important role.
There are two types of compliance instruments under the AB 32 California Cap-and-Trade Program, each representing something different. One type, state-issued allowances, are distributed directly or purchased at auction by regulated businesses. Allowances represent the right to emit a ton of CO2e, a standardized measurement for greenhouse gases. The other type, Compliance Offsets, are certified credits from projects that represent a ton of CO2e reduced. Current law caps both and already recognizes the value of Compliance Offsets and allows a set percentage for Program use.
Another key benefit of offset projects that doesn’t get much discussion in Sacramento, is that they provide climate change resilience in addition to mitigation. Forest projects protect and support stewardship of forest ecosystems, making them more resilient to climate changes. Calculating this added value to California is complicated but material and should not be overlooked.
As affordability has risen to the headlines as a critical issue across California, the mandate to achieve cost-effective GHG reductions has remain a key component, but has always been embedded in Cap-and-Trade Program design, and Compliance Offsets are a cornerstone policy tool to provide cost savings for businesses, the Program, and all Californians. Through 2045, they have the potential to save California businesses and consumers upwards of $7 billion dollars in direct program costs.
Today’s policymakers are working through another round of Cap-and-Trade extension legislation, and are asking these fundamental questions:
- How can we reach the State’s ambitious climate goals, including reducing short-lived climate pollutants, and utilize additional emissions reductions from natural and working lands?
- How can we leverage private capital to complement Greenhouse Gas Reduction Funds? and,
- How can we provide direct economic and environmental benefits to Tribal and rural communities across California in the process?
The answer is simple: continue, and even increase, the use of Compliance Offsets in the Cap-and-Trade Program. Statutory recognition of Compliance Offsets is necessary for their many benefits to continue, and it is clear neither the Program nor California’s communities, ecosystems, and economies can afford to lose access them.
The Verified Emissions Reduction Association, or VERA, is a coalition of members with vast experience in achieving real, quantifiable, permanent, enforceable and addition emissions reductions in a cost-effective manner. The members are directly responsible for millions of tons of GHG reductions. These reductions come from Forestry, Mine Methane, Agricultural Methane and Refrigerant destruction protocols.
Jon Costantino is a long-time climate advocate who represents VERA in front of CARB and the Legislature.
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