Greenhouse gas offsets, or credits, are a central feature of most proposed or enacted national and international cap-and-trade systems. U.S. policymakers have relied on offsets from developing countries as a primary form of cost containment in proposed legislation. These legislative proposals allow for emitters to use up to 1.5 billion tons CO2e of offsets from developing countries to meet their annual compliance obligations.
This report reviews estimates of the projected availability (i.e., supply) of international offsets, and evaluates the various methods used. It finds that estimates vary widely, differing by billions of tons CO2e annually in 2020, but despite the variation, existing studies suggest that the supply will likely exceed U.S. demand for international offsets by 2020 under current Congressional cap-and-trade designs.
It also finds that competition with governments and entities with emission reduction obligations (e.g., the EU), as well as with policies and measures undertaken by developing countries as part of their own mitigation contributions, could reduce the net offset supply available to U.S. entities.
In addition, it notes that several important offset program design and market factors that will be crucial to future offset markets and credit issuance (e.g., sources of offset supply, program stringency and crediting methods, establishment of international governance and market structures) have yet to be systematically considered in offset supply assessments.
The report outlines factors that should be incorporated into future analyses of international offset supply and quality, which will be important as policymakers continue to deliberate on the role of international offsets, including whether and how to recognize credits from the Clean Development Mechanism (CDM), develop new sectoral crediting mechanisms, and consider offsets for reduced deforestation.
Download the report (pdf, 1.32MB)
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