GHG Offset Protocols Upheld in California

Posted on January 30, 2013 by Michael R. Barr

Four California GHG offset protocols survived an important court test last week in Citizens Climate Lobby et al vs. California Air Resources Board (Superior Court of California, County of San Francisco). 

In his January 25, 2013, Statement of Decision, Judge Goldsmith described GHG offsets:
“An offset credit represents a reduction of GHG emissions from an approved uncapped source …Each offset credit represents an emission reduction of one CO2e…  An uncapped source is an entity that is not regulated by the cap-and-trade program.  Not every reduction is eligible for offset credit.  Credits are only awarded to GHG emission reductions carried out pursuant to one of four Protocols promulgated by Respondent [CARB].”

So far, CARB has only approved GHG offset projects in four categories:
    1. Forest Projects
    2. Urban Forest Projects
    3. Livestock Projects
    4. Ozone Depleting Substance Projects

CARB also limited the locations of qualifying GHG offset projects and capped the amount of GHG offset credits entities could use to comply with the state’s GHG cap-and-trade program.

Last year, two environmental groups sued CARB in San Francisco Superior Court to block even this limited offset program, claiming that CARB’s approach to satisfying the “additionality” test for GHG offsets conflicted with the California Global Warming Solution Act of 2006 (aka “AB32”).  The court described the “additionality” test as follows:

“Additionality is the linchpin of an offset program.  A reduction is additional if it would not have occurred without the financial incentive provided by the offset credit.  Additionality is essential to the environmental integrity of an offset program because if reductions are not additional, then the cap-and-trade program will not reduce GHG emissions beyond what would have occurred anyway. . . .”

For its four GHG offset Protocols, CARB adopted a “standard-based approach,” relying on information about the additionality of categories of prospects.  The petitioners preferred that CARB evaluate each offset project’s additionality individually, project-by-project, based on site-specific data and parameters.

CARB vigorously defended its approach to additionality and its GHG offset Protocols in this case.  Several California utilities and coalitions intervened on CARB’s side.  Very significantly, the Environmental Defense Fund and the Nature Conservancy also sided with CARB in this case.

In his January 25 Statement of Decision Judge Goldsmith upheld CARB’s offset Protocols on all issues.  In particular, he found that:

    1. “… as to the Livestock Protocol, the Ozone Depleting Substances Protocol, the Urban Forests Protocol, and the U.S. Forests Protocol, that [CARB] has adequately considered all relevant factors and has demonstrated a rational connection between these factors, the policy implemented, and the purpose of the enabling statutes …the Protocols are not arbitrary and capricious.”
    2. “… Health and Safety Code section 38562, subdivision (d)(2) does not foreclose [CARB] from using standardized mechanisms [for additionality] and it is within the [CARB’s] legislatively delegated lawmaking authority to choose standardized mechanisms …”
    3. “… [CARB’s] use of standardized mechanisms is supported by evidence contained in the administrative record.”
    4. “… Petitioners have failed to demonstrate that the Legislature foreclosed the use of standardized additionality mechanisms or demonstrate that [CARB] acted arbitrarily or capriciously in promulgating additionality standards."

Prompted by CARB and the Intervenors, the court recognized the important roles that GHG offsets play in reducing the cost of GHG emission reductions and promoting innovation.  The court’s 34 page opinion thoroughly analyzes complex legal issues, including the “additionality” issue.  Along the way, the court also accepted CARB’s rejection of the Kyoto Protocols’ Clean Development Mechanism (“CDM”), finding as follows:

“The Court finds the factors which have rendered the CDM problematic in terms of administrative complexity, delay, and cost, to be highly persuasive in concluding that [CARB’s] rejection of the CDM project-by-project approach was justified programmatically and consistent with its legislative grant of discretion.” (Statement, p. 11)

This finding, and much of this court decision, may be of interest to climate practitioners here in the U.S. and overseas.



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