A new report, “Forging the Climate Consensus: Domestic and International Offsets” makes clear exactly how important a role high-quality offsets play in maintaining the integrity of climate legislation — and how they could allow an international climate agreement to achieve far stronger emissions reductions targets than would otherwise be possible.

The report was issued by the National Commission on Energy Policy, which represents major corporations, NGO’s, and labor unions (and whose executive director is Jason Grumet, Obama’s top energy advisor during the campaign, so it should be taken at least somewhat seriously as the type of thinking being seriously considered in the White House and on Capitol Hill). It includes strong support for offsets, but questions if the verification requirements in the legislation are too tough to allow offsets to be brought to market in sufficient quantity to deliver major cost savings for climate legislation, especially in the first years.

If the bill’s restrictions on use of offsets are so severe as to prevent them from being developed, their cost containment value would be reduced and the cost of climate legislation would be higher. That’s of concern to the members of the commission, many of whom represent utilities and other interests that are, to a great extent, focused on keeping the cost of climate legislation down (a concern shared by many senators whose votes we’ll need to pass climate legislation).

As a result, the commission recommends adopting alternate cost-containment measures like a price collar or an allowance auction reserve to hold prices down.

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That’s a huge problem. Unlike offsets, which, when done right, deliver emissions reductions by financing affordable (and important) activities like forest conservation and reforestation, price collars let polluters off the hook whenever the price of carbon rises above a certain level — a dangerous policy, given that we can’t be 100 percent sure what the price of carbon will be at any given time. An allowance auction reserve works in a similar way — the government just releases more pollution permits whenever the price rises. Unlike offsets, which deliver affordability through pollution reductions, these mechanisms deliver affordability but no emissions reductions.

That’s a fundamental calculus that offset critics just don’t seem to get: if you remove offsets from legislation or an international climate agreement and you have to find cost control mechanisms somewhere else — or just lower the targets. And that doesn’t do any good for the planet or its people.

It was a perspective certainly missing from two anti-offsets broadsides issued this week by opponents of climate legislation: the “Dangerous Distraction” report by Friends of the Earth and a Greenpeace website mocking their use.

Of course, it’s essential that offsets actually deliver reductions in pollution. FOE and Greenpeace recycle decades-old claims to imply that many offsets are less than credible.

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But these are not your daddy’s offsets. There have been tremendous advances to ensure that offsets, especially forest-based offsets, deliver the reductions they promise. Consider the offsets in the American Clean Energy and Security Act passed by the House of Representatives.

In addition to establishing a rigorous scientific board to evaluate any proposed offsets, the bill also includes an essential requirement: in order for any offsets to receive credit, they must have already taken place. In other words, you can’t get credit for a plan to offset emissions, but only for verified emission reductions that have already occurred.

In addition, there are a variety of very strict requirements to ensure, for instance, that indigenous and forest-dependent people benefit from tropical forest conservation offsets (indeed, if a country doesn’t meet the bill’s standards for protection of indigenous people, they could be entirely shut out of the program) and that domestic reforestation activities use only native species and protect biodiversity.

Protection of indigenous people is an especially important issue. Deforestation has brought disease, terror, and displacement to indigenous communities around the world. In the Amazon alone, more than 90 indigenous tribes have been wiped out since 1900. These forests are being destroyed because they’re not valued for the immense quantity of carbon they store.  To unscrupulous agribusiness and timber interests, their only value is as plantation land. In other words, they’re worth more dead than alive.  And to some corporations, the same goes for the communities who live in them. Offset critics sometimes forget that the greatest threat to forest-dependent indigenous people is the destruction of forests, not their conservation. The simple fact that forest offset critics sometimes forget is that the greatest threat to the indigenous people of the forests is their destruction, not their conservation. It’s for this reason that rainforest nations have been the leaders in calling for inclusion of incentives to protect forests in climate legislation.

But it’s not just Greenpeace and Friends of the Earth who underestimate offsets’ potential. I think those who are skeptical about how many will be eligible to be brought to market may underestimate the ability of even the poorest nations to develop, for instance, robust national plans and baselines to monitor the effects of deforesttation and conservation. With the possibility of big development resources on the table, they may be spurred to action faster than anyone realizes. Indeed, Brazilian states, in particular, have shown tremendous capacity to ramp up to monitor and attract forest conservation projects.

Of course, I don’t want to pretend that all offsets are good. A variety of polluting industries have in the past successfully lobbied for crediting of their dubious activities. Friends of the Earth is absolutely right to point out the absurdity of providing carbon credit to, for instance, big dams, as has been done under the Clean Development Mechanism. Even if one accepts their carbon reductions, the damage they do to rivers and local communities is enormous. These dams should be removed, not subsidized (tell that to the World Bank, which has drastically increased their subsidies for dams).

For instance, there are real worries that the standards behind the domestic agricultural and biomass offsets are way too weak — meaning that they could undermine a lot of the good work the legislation does to protect forests (see this post for more).

I think there’s a fairly easy way to tell which kinds of offsets we should be suspicious of and which we shouldn’t: look at what those backing certain kinds of offsets are saying: in general, those willing to embrace rigorous scientific and social standards can be trusted more than those who are lobbying for weaker standards, such as the Big Ag lobby. I wish offset critics were able to see the difference between crediting activities to save forests and giant environmentally destructive hydropower projects or unsustainable biofuels cultivation. Their legitimate criticisms might be listened to more seriously if they didn’t try to demonize, for instance, saving endangered forests as well.

This is especially true when it comes to tropical forests. Critics successfully fought to keep tropical forest offsets out of the Kyoto Protocol. The world has suffered the consequences since then. Because of this giant mistake, more than 300 million acres of forest have gone up in smoke in the last ten years, producing an amount of global warming pollution equivalent to ten times the United States’ annual emissions. That mistake has not only polluted the climate, it’s also made extinct an untold number of species and allowed genocide and murder to be perpetrated against indigenous peoples throughout the tropical forest belt. It’s time to come up with solutions to the deforestation crisis, not just dump on one of the key mechanisms that could provide ammo to solve it. 

A final point: the use of offsets shouldn’t be conceived of as some kind of necessary concession.  They should be used in any climate legislation (or international agreement), no matter how strong, to make it even stronger by getting bigger pollution reductions for the same economic and political cost.