The California Assembly recently withdrew a bill that would have regulated the state’s voluntary carbon offset markets.  AB 1851 called for civil penalties for advertising offset credits that had not been certified according to standards recognized by the California Air Resources Board (CARB) or the California Climate Action Registry (CCAR), or otherwise met specific integrity criteria.  CARB is the state’s air pollution regulator and CCAR is a nonprofit organization that maintains a voluntary carbon registry for California entities that want to track and reduce their greenhouse gas (GHG) emissions.

AB 1851 defines an offset as “a voluntary reduction in the emissions of greenhouse gases into the atmosphere undertaken for the purposes of selling, trading, or otherwise providing the credit or emission reduction to another party.”  The voluntary markets have come under scrutiny over the last year, as a result of significant questions about the environmental integrity of many offset projects.  The Federal Trade Commission, for example, is currently studying whether to regulate advertising related to carbon offset credits; recognizing the possibility of federal regulations in this area, AB 1851 would have become inoperative if the FTC “adopts binding and enforceable trade rules or regulations for claims or representations for greenhouse gas emission reduction credits or reductions to protect consumers.”

Carbon offsets must be quantifiable, measurable, verifiable, and additional to any reductions that would otherwise occur.  CARB, CCAR, and other verifiers ensure that the emission reductions are real and properly measured.  For some types of projects, such as installing equipment at an agricultural facility to capture methane emissions, this is a relatively minor issue.  For other types, such as forestry and land use projects, proper measurement can be highly controversial, because it requires calculating the amount of carbon that a group of trees sequesters from the atmosphere.

Some environmental groups fought against AB 1851, arguing that it would severely harm the voluntary offset market.  By stopping this bill, however, they may have achieved a Pyrrhic victory.  With dozens of unregulated companies selling carbon offset credits for potentially dubious projects, there is a risk that the public will lose faith not only in the voluntary markets but in carbon offsets as a whole, setting back efforts to combat climate change.

Supporters of the bill see this type of regulation as necessary for ensuring the future of carbon offsets, which play a role not only in voluntary emission reduction schemes but also in mandatory compliance programs like the European Union Emissions Trading System, which was established pursuant to the Kyoto Protocol.  Offsets provide an important financial incentive for achieving cost-effective emissions reductions.  If they become less attractive due to integrity concerns, it has the potential to cause significant harm to emission reduction efforts worldwide.

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