Enciclopédia da Energia Natural   CPMA.COMUNIDADES.NET
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Enciclopédia da Energia Natural CPMA.COMUNIDADES.NET


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less carbon-intensive technologies.
Certifying Carbon Offsets: Challenges
In principle, an emitter should obtain carbon offsets only for
emissions reductions or removals from the atmosphere above
and beyond what would occur in the absence of carbon offset
incentives, a condition known as \u2018additionality.\u2019 Thus, if a
developing country would install wind-generating capacity in
the absence of subsidies or the ability to sell offsets, such
investments should not be credited as CERs. If it is demon-
strated that a forest would be harvested and converted to
another use in the absence of a specific policy to prevent this
from happening, the additionality condition is met. Carbon
sequestered as a result of incremental forest management ac-
tivities (e.g., juvenile spacing, commercial thinning, fire con-
trol, fertilizing) would also be eligible for carbon credits but
only if the activities would otherwise not have been under-
taken. Similarly, afforestation projects are additional if they
provide environmental benefits (e.g., regulation of water flow
and quality, wildlife habitat) not captured by the landowner
and which would not be undertaken in the absence of eco-
nomic incentives related to the sale of carbon credits. The
difficulty is determining whether or not carbon offsets are
additional.
Another difficulty is that of assessing leakages \u2013 the extent
to which a mitigation activity increases emissions elsewhere.
For most energy conservation projects, estimates indicate that
6 Encyclopedia of Energy, Natural Resource and Environmental Economics http://dx.doi.org/10.1016/B978-0-12-375067-9.00165-0
only 40% of the anticipated emissions reductions are actually
realized. Leakages for forestry projects that sequester carbon are
estimated to range from 5% to 93%, depending on the type of
project and its location; Mark Boyland finds that by failing to
include a 25% leakage factor, costs tend to be underestimated
by one-third.
Although projects that create carbon offset credits may be
legitimate, it is difficult to determine how many offsets are
actually generated. This is particularly troublesome given that
CERs do not always correspond with reductions in CO2 or
improved energy efficiency. Michael Wara indicates that 28%
of 1534 CER projects at the time he was writing involved
destroying HFC-23s. Since then, carbon offsets from land use
have been increasingly emphasized.
Carbon Offsets from Forests Conservation
Land use, land-use change, and forestry (LULUCF) can be used
to create domestic RMUs. LULUCF activities are also permitted
under the CDM but under strict conditions. Although forest
conservation activities are currently not eligible as carbon off-
sets, concerns about tropical deforestation have led many to
commend the use of forest conservation in developing coun-
tries as a tool for addressing global warming. In international
negotiations, activities that Reduce Emissions from Deforesta-
tion and Forest Degradation (REDD) are touted as an alterna-
tive means for earning CER credits (see http://www.un-redd.
org/). Indeed, as a result of negotiations at Cancun in December
2010, the narrow role of REDD has been expanded to include
sustainable forest management, forest conservation, and en-
hancement of forest carbon stocks, collectively known as
REDDþ. In this way, it is possible to link the UNFCCC and
the 1992 Convention on Biological Diversity (CBD). Conse-
quently, climate negotiators appear increasingly willing to ac-
cept REDDþ activities as potential carbon offsets to the extent
that these activities also promote social and ecological out-
comes. How does one sort out the additionality issue if emis-
sions reductions and ecological outcomes are considered to be
the same thing? How does one prevent sale of multiple envi-
ronmental services (carbon offsets, biodiversity) in more than
one market, something Richard Woodward refers to as
\u2018double-dipping.\u2019 Further, because deforestation and forest
degradation are a greater problem in developing countries,
only REDDþ projects in those countries should merit atten-
tion, but there is no reason (in principle) to exclude such
projects in developed countries.
If carbon offsets can be created through a variety of
LULUCF activities, one must deal with the problem of dura-
tion. Duration refers to the fact that carbon offset projects
remove CO2 from the atmosphere over some time period but
eventually release it back to the atmosphere. Since the timing
of removal and release is uncertain, and varies across projects,
it is impossible to determine how many offsets any project
creates. While biological carbon sequestration was only meant
to be a bridge to provide time for countries to develop and
invest in emission-reducing technologies, the sale of such
credits lowers carbon prices, thereby discouraging investment
in emissions reductions.
Complexity fundamentally impacts the functioning of the
price mechanism in carbon markets. Carbon offsets that are
difficult to verify, monitor, and compare to emissions reduc-
tions are created in various ways: as a result of REDDþ activ-
ities, by destroying HFC-23s produced in newly built plants, or
by building wind farms that are unconnected to the electricity
grid or operate at a much lower than anticipated capacity.
Further, the principles for creating and certifying carbon offsets
that were designed to benefit poor countries can easily be
applied to industrialized countries. Indeed, there already exists
a market for voluntary emissions reductions (VERs) in devel-
oped countries, and there is some evidence suggesting that
such VERs are making their way onto legitimate compliance
markets.
By supplying the compliance market (e.g., EU ETS) with
carbon offsets, the carbon price mechanism becomes distorted
because sales of carbon offsets unrelated to direct CO2 emis-
sions reduction take place. The potential to accept carbon off-
sets from many disparate sources (and from any developed
country) for sale on legitimate compliance markets makes it
increasingly difficult to identify their legitimacy. When added
to the currently permitted sale of ERUs and CERs as carbon
offsets, the sale of offsets created anywhere and bymanymeans
increases market complexity, which is conducive to rent-
seeking, leading to corruption and second-best outcomes. It
is little wonder that some economists oppose carbon offsets in
favor of something simpler \u2013 tax emitters for any CO2 entering
the atmosphere, whether from fossil fuel burning or deforesta-
tion, and subsidize any activity such as tree planting that
removes CO2 from the atmosphere.
Further Reading
Andersson K, Evans TP, and Richards KR (2009) National forest carbon inventories:
Policy and assessment capacity. Climatic Change 93: 69\u2013101.
Boyland M (2006) The economics of using forests to increase carbon storage. Canadian
Journal of Forest Research 36(9): 2223\u20132234.
Dargusch PJ and Thomas S (2012) The Business of Carbon Offsets: Market
Mechanisms and Climate Change. London: Edward Elgar Publishing.
Freestone D and Streck C (eds.) (2009) Legal Aspects of Carbon Trading: Kyoto,
Copenhagen, and Beyond. New York: Oxford University Press.
Galik CS and Jackson RB (2009) Risks to forest carbon offset projects in a changing
climate. Forest Ecology and Management 257: 2209\u20132216.
Gillespie A (2003) Sinks and the climate change regime: The state of play. Duke
Environmental Law and Policy 13(2): 279\u2013301.
Helm D and Hepburn C (eds.) (2009) The Economics and Politics of Climate Change.
New York: Oxford University Press.
Helm D (2010) Government failure, rent-seeking, and capture: The design of climate
change policy. Oxford Review of Economic Policy