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Cap And Tirade

Publication Date: 
December 03, 2009
The Economist

Professor Michael Wara, an expert on environmental law and policy, is quoted in The Economist on the authenticity of carbon offsets:

America struggles with climate-change legislation

"What that means in code", Senator Bob Corker, a conservative Republican from Tennessee, told the audience at a hearing of the Senate Committee on Energy and Natural Resources about America’s proposed climate-change legislation, "is we’re transferring wealth from our companies and our citizens…to raise carbon prices and send money abroad."

Senator Maria Cantwell, a left-wing Democrat from Washington, does not normally agree with Mr Corker, but her line of reasoning was similar. In costing the bill, she said, the Environmental Protection Agency had estimated that $1.4 trillion dollars a year would go abroad to cover the generous provision for offsets in the bill. "What can we buy abroad for that? Can’t we spend this money on developing technology at home?" Senator Corker was fairly sure that the foreigners would find things to sell America. "When $1 trillion comes around there are hucksters all over the world who will do business with you."


But Michael Wara, an expert on environmental law at Stanford University, argues that it is in practice impossible for the board to know that the projects they approve would not have happened otherwise, and indeed some of the projects that have been financed look as though they might have. He cites some 20 gas-fired power stations in China that were partly financed by the CDM (and thus, indirectly, by European consumers). Given that China long ago announced its intention to diversify out of coal for reasons unconnected with climate change, he reckons that those power stations would have been built anyway, so the emissions cuts they led to were not additional. Senator Corker shares his scepticism about offsets. "That’s not a market," says the senator. "That’s Alice in Wonderland make-believe."

The Waxman-Markey bill covers more of the American economy than the ETS does of Europe’s, and takes a far more generous approach to offsets. As a result, the American offset market would be 20-50 times larger than the existing CDM market, says Mr Wara. This could pose problems. The CDM board’s approval rate has declined lately because it is determined not to issue dodgy credits. With a market as large as America promises to create, there is a risk that there will not be enough offsets available, or that they will be suspect. Senator John Barrasso, a Republican from Wyoming who sits on the energy committee, predicts that it will be "rife with green-collar crime".