Offsets Against Carbon Taxes: Using Ercs For Greenhouse Gas Policy

Posted on April 11, 2013 by Jeffrey C. Fort

Climate Change and the deficit are at the top of the legislative and policy agenda for the country.  Some economists love the “carbon tax.”  Senators Sanders and Boxer recently proposed the Climate Protection Act of 2013 -- to impose a tax on fossil fuels and high carbon intensity products sold in the US.  Many in the popular press are now advocating for a carbon tax, to reduce the deficit and to provide for reductions in carbon emissions.

Rather than believe that a tax can create just the right mix of incentives and funds to promote de-carbonization measures, I would argue that the ability to offset ought to be included in any such measure.  Carbon offset credits are based on one of the most significant legislative changes in the 1977 Clean Air Amendments --the requirement to get Emission Reduction Credits.  While ERCs were limited to requirements for a new or modified major emitting facility in a “non-attainment area,” the principles of ERC of ERCs can be found in the documentation now known as “carbon offsets.”  Scores of methodologies or protocols are now recognized as scientifically valid for activities which are not required by law and which do not represent business as usual. The proof required to earn a valid carbon offset credits is considerable, at least as exacting than even what EPA requires for ERCs.  Because it is the regulated industry which chooses whether to use an offset or not, offset credits have another level of proof -- that of the end user - to satisfy.  And Innovation and entrepreneurs are characteristic of carbon offset credits.

Not only are carbon offsets a recognized cost containment tool in many GHG control programs, it allows different approaches to carbon reduction to compete against each other.  The most efficient and most effective will have the lower price; and hence be more attractive than other ways of reducing. And it will bring in sectors with GHG emissions which would not be reduced otherwise.  From livestock wastewater operations to improved forestry management, from rice cultivation practices to coal mine methane, emission reductions will occur which would not otherwise. A more detailed discussion of this topic can be found at www.Dentons.com.



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