Offsetting Global Warming

The word "offsets" appears 524 times in the US House of Representatives Waxman Markey Act, which was passed on June 20, 2009. The Act, formed "to create clean energy jobs, achieve energy independence, reduce global warming pollution, and transition to a clean energy economy," makes the word offset sound commonplace, but it is not widely understood. "Offsets" was used most in association with the commonly understood term "forest" which appears 200 times.

In the Act, "offsetting" means to find an equivalent reduction of global warming pollution. This can include an alternative renewable energy, or four forest related offsets defined in the Act as: (1) through forest ecosystem restoration; (2) through afforestation/reforestation of deforested land; (3) through conservation of land scheduled for temporary or permanent forest clearing; and () through Improved Forest Management. The last is perhaps simply a mosaic of the previous three, each applied appropriately tree-by-tree across a forest landscape.

Offsets are not a new idea. This magazine's article on Habitat Conservation Banking in the Fall 2009 issue notes this offset concept has been in play in the US for over a decade. If a freeway was scheduled to destroy a wetland, an environmental entrepreneur, anticipating the development, might buy a formerly drained farm nearby, re-flood and restore the wetland, and bank it to offset the planned wetland destruction of the development to meet EPA requirements. Some wetland offsets were constructed and banked five to ten years before they were traded. It gave the restored ecosystem time to mature but required partnership between ecosystem science and speculative investment in a future ecosystem asset trade.

Another offset system emerged in BC in 1987 with the Reforestation Regulation. In exchange for disturbing a standing forest, the harvester is required to reforest similar species and tend them until free growing, which can take from 8 to 20 years. However, most BC ecosystems will take at least a century to mature before the reforestation fully offsets the harvested forest. Replacing an old forest with a young one is considered acceptable, because it mimics the forest's natural cycle. Forests rotate both as old trees die and young trees take over, but also as natural disturbances regenerate after fires, pests, and disease.

The Waxman Markey Act accepts the first type of climate offsets in US forests - banking credits for use once they have been proven, but it puts some restrictions on the second. Like other climate bills, the Waxman Markey Act calls replacing today's emissions with promised future growth an ex-ante credit. It prohibits selling projected future or ex-ante GHG credits. Since all reforestation projects require up- front investment, reforestation developers have argued they need ex-ante credits. The California Carbon Regulation and the Voluntary Carbon Standard, like the Waxman Markey Act, do not permit the trading of future credits to offset current emissions. Carbon Fix permits ex-ante credits to 2050 and deducts considerable buffer to account for the risk of project failure. The other standards also deduct buffers, and permit options on future credits to be purchased. These four standards encourage a wide number of land use change projects, and similar new standards are expected to emerge in other jurisdictions over the next few years.

The Natural Fix, The Role of Ecosystems In Climate Mitigation, a UN Environment Program's publication which came out the same month as the Waxman Markey Act, scopes the potential for offsets of natural systems to capture and store GHGs from the atmosphere. "Safeguarding and restoring carbon in three systems - forests, peatlands, and agriculture, might over the coming decades reduce well over 50 gigatonnes of carbon emissions that would otherwise enter the atmosphere; others like grasslands and coastal ones such as mangroves are capable of playing their part too." This could double to 100 gigatonnes with increased demand and significantly higher carbon prices.

Removing or avoiding 50 billion tonnes of CO2 equivalent would require restoring or conserving hundreds of millions of hectares. This will require a major investment through the silviculture and agriculture industries to optimize natural systems. The Natural Fix argues that without these sectors the world is unlikely to avoid a climate tipping point.

With the Copenhagen climate negotiations' final draft language for REDD Plus embed in the Copenhagen Accord, a new level of forest offset credits development and trading will inevitably emerge, though it will take a few years for market rules to be finalized and a robust trading market to begin.