Do Offsets Really Help Reduce Emissions?

The climate bills working their way through Congress are the biggest effort ever to limit greenhouse gases for the U.S. One huge concession to industry is a system of offsets, by which companies that need to lower their carbon "footprint" can pay to reduce carbon emissions somewhere else. But offsets are seen by critics as a dodge for companies that don't want to clean up at home.

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RENEE MONTAGNE, host:

In the next few minutes, we're going to hear about one particular scheme used to encourage industry to lower greenhouse gases. Today, the Senate's Energy Committee hears from economic experts on how much it could cost to curb global warming. It won't be cheap. That's why pending legislation on a climate plan includes a lot of escape clauses designed to ease the pain for industry and consumers.

NPR's Christopher Joyce reports.

CHRISTOPHER JOYCE: The model so far for curbing greenhouse gases is the cap-and-trade approach. It works through permits. Think of them as sort of like poker chips. The government gives or sells permits to, say, power companies. A company cashes in a chip when it emits a ton of greenhouse gas. Use up your pile of permits, and you've got to buy more. If you don't need all of them, you can sell the extras to another player.

Many industries are saying, okay, we can live with that, if we can have offsets, too. Offsets are like an extra pile of poker chips that companies can buy at a discount. Michael Wara is an economist at Stanford University who studies offsets.

Professor MICHAEL WARA (Economy, Stanford University): They induce countries, governments, companies, individuals who are otherwise reluctant to do something about climate change to do something about it because it's in their financial interest. They draw people in.

JOYCE: Let's say you run a power company and you just can't live within your emissions cap. Well, you can pay someone else to reduce their emissions. That could be cheaper than rebuilding your own power plant to emit less carbon dioxide.

European companies have been doing this for years. They pay China, for example, to build hydroelectric dams instead of coal plants, or they pay farmers to capture methane from hog waste instead of letting it float up into the atmosphere.

But offsets make some people suspicious. They ask how many of these projects really deliver the emission reductions they promise.

Prof. WARA: The honest answer is we don't know.

JOYCE: Michael Wara again.

Prof. WARA: They've proven to be very difficult to administer effectively in a way that ensures that they lead to real reductions in emission.

JOYCE: Here's one of the problems: Let's say a Chinese power company needs a new power plant. They can build a coal plant, which is cheap, or they can build a wind farm, which costs more. If they choose the wind farm, though, they can earn credits they can sell on the offset market. The idea is that money from polluters will pay for additional green projects that wouldn't have been built otherwise.

Trouble is, says Wara, China probably would have built most of those wind farms, anyway, without the offset money.

Prof. WARA: China's building a lot of wind farms. All of the wind farms that are being built claim credit as offset projects. And so the question is: Would none of those had been built if the offset system didn't exist? I think the real answer is that that can't be right.

JOYCE: The group International Rivers concludes that it's the same with dams. Most have earned offset credits in China, but many would have been built, anyway.

Europeans are now rethinking their whole offset scheme, but the proposed climate bill in Congress would introduce much of the same system here. In fact, the bill allows American industry to buy as much as two billion tons of greenhouse gas offset credits.

Many of those credits are likely to come from American forests. Trees suck carbon dioxide out of the atmosphere, and America has lots of them. But that raises another different problem, something called permanence. Alexia Kelly is a climate analyst with the World Resources Institute in Washington. She supports offsets, but…

Ms. ALEXIA KELLY (Climate Analyst, World Resources Institute): Forests can burn down. It can - they can be prematurely or illegally harvested. We can have a pest or disease outbreak that can kill the biological matter and rerelease the carbon. There's a lot of things that can happen.

JOYCE: One way to handle the risk, she says, is to make companies buy extra offset credits - something like insurance - in case their forest goes up in smoke. Kelly acknowledges that an honest offset scheme will take a lot of people and a lot of vigilance.

Ms. KELLY: Are we going to get it completely right all the time? No. But I think that we can ensure that projects that do deserve credit are getting them.

JOYCE: In California, an organization called the Climate Action Reserve has taken the plunge. It's brokering deals between timber owners and polluting companies that want to buy offsets now. Gary Gero runs the Reserve.

Mr. GARY GERO (Climate Action Reserve): We've gone from, in last year of six projects, to a hundred projects. And I think it can go to thousands of projects.

JOYCE: Gero says the Reserve uses a tougher standard than the Kyoto system to make sure offset projects are the real McCoy.

Ultimately, says Stanford's Michael Wara, offsets are probably in the cards no matter what.

Prof. WARA: There's a political compromise in the U.S. that's been drawn between environmental groups and big emitters of greenhouse gases.

JOYCE: That compromise is that to win deep cuts in emissions, Congress has to offer more cheap poker chips to get the game going.

Christopher Joyce, NPR News.

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