“Rip-offsets,” I LOVE it!

Angela Johnson Meszaros
Director of Policy and General Counsel
California Environmental Rights Alliance

I’m going to (try to) coin a new term here, “rip-offsets,” since I can’t think of a better word for the rip-off offsets the Chicago Climate Exchange is peddling to a gullible public and media.

So says Dr. Joseph Romm, who holds a Ph.D. in physics from M.I.T. I think that’s pretty darn impressive. He’s also a Senior Fellow at the Center for American Progress, where he oversees the blog ClimateProgress.org.

I’m jumping on the bandwagon—but I’m extending the phrase beyond rip-offsets on the Chicago Climate Exchange to all offsets.

[Really, you should read his blog entry Q: What is the difference between carbon offsets and mortgage-backed securities? It’s great.]

Rip-offsets are a serious and important issue since California is planning to buy into rip-offsets as a central part of our efforts to reduce greenhouse gas emissions. This Administration has committed California to being part of the Western Climate Initiative (WCI). WCI includes California, Montana , New Mexico, Oregon, Utah and Washington, as well as the Canadian provinces of British Columbia, Manitoba, Ontario, and Quebec . On September 23, the WCI published its Design Recommendations for the WCI Regional Cap-and-Trade Program, which states:

The WCI Partner jurisdictions will limit the use of all offsets, and allowances from other GHG emission trading systems that are recognized by the WCI Partner jurisdictions, to no more than 49% of the total emission reductions from 2012-2020 in order to ensure that a majority of emissions reductions occur at WCI covered entities and facilities. (page 10)

First, the notion that “the majority of emissions reduction will occur at WCI” facilities is funny. It’s true, obviously, but the 51-49 split feels a bit contrived, just to allow proponents to say “the majority of reductions will occur within WCI” without lying. As a practical matter 49% of rip-offsets occurring outside the WCI’s leaves a lot of room for, well, rip-offs. Secondly, under this construction, any individual facility could have 100% of its “reductions” occur “off-site”—that is away from the community that is sucking down the emissions from the facility.

I know, I know, carbon is global. Let’s remember that, really, no facility emits only carbon—the carbon comes from burning fossil and other fuels and all combustion processes generally produce PM2.5 and other pollutants that negatively impact public health and the environment. Those pollutants are local and the choices we make about how to reduce carbon will have serious impacts on public health.

So, where could all these emissions occur since they don’t have to happen at the facility causing the pollution? The WCI document explains that:

WCI Partner jurisdictions may approve and certify offsets projects located through out the United States, Canada, and Mexico…WCI Partner jurisdictions may accept offset credits from developing countries though the Clean Development Mechanism (CDM) of the Kyoto protocol (page 11)

The CDM was created under the Kyoto Protocol and claims to be considered a trailblazer. Abuses of the offset system are well documented. Such information, I’d guess, is what led Patrick McCully, Executive Director, International Rivers to write in June 2008:

The world's biggest carbon offset market, the Kyoto Protocol's Clean Development Mechanism (CDM), is a global shell game that is increasing greenhouse gas emissions behind the guise of promoting sustainable development. The misguided mechanism is handing out billions of dollars to chemical, coal and oil corporations and the developers of destructive dams -- in many cases for projects they would have built anyway.

According to David Victor, a leading carbon trading analyst at Stanford University, as many as two-thirds of the supposed "emission reduction" credits being produced by the CDM from projects in developing countries are not backed by real reductions in pollution.

This kind of abuse doesn’t happen only in the CDM—it’s here in the US, too. As Dr. Romm points out in his blog:

Buried at the very end of the article is a description of just how worthless many Chicago Climate Exchange offsets are. The article describes an offset so pathetic, so questionable, that it shocked even me, and I already thought most offsets are no better than mortgage-backed securities:

In the western Virginia town of Christiansburg, the operators of a landfill sell carbon offsets tied to a project that captures methane, a powerful greenhouse pollutant, and burn it in a tall orange flare. They’ve made $43,000 on the Chicago Climate Exchange in just a couple of months.

But that project was put in long before the offsets were sold and for a different reason: to keep dangerous gases from accumulating in a capped landfill. So if the offset market dried up completely?

Nothing would change.

The money “is gravy to us right now,” said Alan Cummins, executive director of the regional authority that runs the landfill. Even without it, he said, “we would always continue to flare.”

I was trying to come up with a better word than fraudulent to describe such an “offset,” and “rip-offsets” is what came to mind, since this has got to be the biggest climate rip-off since China crashed the Clean Development Mechanism party with its own brand of fraudulent offsets that don’t offset anything.

People are actually paying the Chicago Climate Exchange tens of thousands of dollars to pay this landfill to keep doing what they would do anyway — and what they are doing anyway isn’t even particularly good for the environment.

So what’s my point—well there are three, 1) I’m continuing my theme of “cap and trade won’t work” and I’m asserting here that offsets won’t work, either; 2) this failure is a big problem for communities who host the facilities that will be trading and offsetting out of any obligation to reduce their emissions under the fiction of effective action; and 3) Points 1 and 2 are sub-points for a broader issue: this is very troubling since we’ve really got a very short time to get a handle on carbon emissions and time we spend messing around with this is time we aren’t spending implementing real solutions like changing the way we make and use energy.

But some folks are big fans of offsets—like Goldman Sachs wrote during the WCI development process:

We have extensive experience developing offset projects under the Kyoto Protocol and for the voluntary market, and hope that our insights will assist the WCI in developing design recommendations for a proposed cap-and-trade program.

Goldman is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

Hummm, I wonder what those guys are doing these days?