Transcript Climate Actions in EU and Globally

Offsets and Climate Policy:
EPA Perspectives
Dina Kruger
Director, Climate Change Division
U.S. Environmental Protection Agency
May 30, 2008
Offsets Defined
• Offsets are emissions reductions from non-capped
source categories
– Done right, they will
• lower the costs of the overall program to regulated sources
• require moderate administrative procedures to implement
• create incentives for reductions in non-capped sectors
– Done wrong, they will
• impose a substantial administrative drag on both the
government and regulated entities
• pose a risk that the reductions aren’t real, thus, effectively
increasing the overall cap and negatively impacting the
environmental integrity of the overall system
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Importance of Additionality
No Offset/No Cap
Landfill Emissions (without
methane
collection/combustion)
Power plant
Emissions (no cap)
Offset/Cap
Cap
Landfill Reduction (with
methane
collection/combustion)
Power plant
Emissions (with
cap)
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Offsets and Climate Policy
EPA Perspectives Informed by
• Programmatic experience in the offset sectors
• Economic analysis of sectoral mitigation options
• Economic analysis of legislative proposals
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On-the-ground Experience
• Domestic and international programs
to reduce methane and high-GWP
gases
• Provide technical assistance
– Identifying candidate sites
– Conducting feasibility studies
– Bringing partners together
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Demonstrated Results
Changes in U.S. Methane Emissions and
Economic Growth 1990 - 2005
Cumulative Total U.S. Government Funding and
12000
600
10000
560
8000
Leveraged Funding
Billion $
MMTCO2E
640
Leveraged
funding
$262,089,623
Total U.S.
Government
$18,102,638
funding
Methane Emissions
•
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
6000
1990
520
$0
$100,000,000
$200,000,000
$300,000,000
GDP
Total US Methane Emissions in
2005 were more than 11% lower
than emissions in 1990, in spite
of economic growth over that
time period.
• Methane to Markets
− US is leveraging significant
investment and engagement from
the private sector
− Projects initiated through 2006 are
expected to achieve annual
emission reductions of almost 10
MMTCO2E
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Applying Program Knowledge to
Economic Analysis
• EPA reports on mitigation opportunities
and costs for non-CO2 gases and
agriculture and forestry
– Engineering cost curves
– U.S. and Globally
– Gas by gas, sector by sector
• EPA data integrated into most climate
economic models
• Substantial improvement in analytical
ability
– How many tons are available?
– At what cost?
– In what sectors and regions?
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Offset Provisions of
Bills Analyzed by EPA
• “Lieberman-Warner Climate Security Act of 2008” (S. 2191)
– Domestic offsets may be used to meet 15% of compliance obligation
– International credits may be used to meet 15% of compliance obligation
– Set-asides for agriculture and forestry sequestration as well as landfill and
coal mine CH4
• Bingaman-Specter, “Low Carbon Economy Act” (S. 1766)
– Unlimited specified domestic offsets can be used to meet the emission cap level
– Specified offset project categories include CH4 from landfills, coal mines, and
animal waste, and SF6 from electric power systems
• For other offset project categories, the President may distribute less than 1 credit for each ton of
greenhouse gas emissions reduced or sequestered.
• Our analysis assumes that only offsets from specified project categories are allowed.
– The President can implement an international offset program, allowing not more
than 10% of compliance to be met through this program
– Set-asides for agriculture sequestration
• Lieberman-McCain, “Climate Stewardship and Innovation Act” (S. 280)
– Domestic offsets & international credits can be used to meet up to 30% of
compliance obligation
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Offset Provisions of S. 2191 (L-W)
Significantly Influence Costs
Marginal Cost of GHG Abatement in 2030 - Sensitivity Cases
Unlimited Domestic Offsets and International Credits
Unlimited Domestic Offsets, 15% International Credits
-71%
-26%
Core: 15% Domestic Offsets, 15% International Credits
0%
15% Domestic Offsets, No International Credits
34%
No Domestic Offsets or International Credits
93%
Nuclear and Biomass Constrained to Reference
31%
Nuclear and Biomass Constrained, No CCS before 2030
82%
-100% -75% -50% -25%
• 2030 Allowance price in core S. 2191 Scenario: $61 - $83
0%
25%
50%
75% 100%
% Change from Core S. 2191 Scenario*
• Range of 2030 Allowance prices in all scenarios: $24 - $160
• Scenario 2 from EPA’s analysis of S. 2191: S. 2191 as written (15% of compliance obligation from domestic
offsets, 15% from international credits), assumes 150% increase in nuclear power between now and 2050,
assumes CCS available after 2015.
• Provisions for Nitrous Oxide/Methane set aside allowance dropped in the Substitute Amendment to S2191; the
15% limit on offsets is now applied to the annual overall quantity of emissions allowances rather than individual
compliance obligations.
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S. 2191 – Sources of Domestic Offsets
(Cumulative 2012-2050)
CH4 from the
natural gas sector
CH4 from coal mines
Ag Soils
17%
CH4 from
landfills
12%
Forest
Management
18%
Afforestation
38%
Other Ag CH4 & N2O
• The total quantity of
abatement from
domestic offsets is
limited to 15% of
allowance submissions
in each year.
• The quantity of
abatement from
international credits is
similarly limited to 15%
Animal Waste CH4 of allowance
submissions in each
year.
• The quantity of
abatement from
allowance set-asides is
prescribed by the bill,
4% of allowances in
each year are set aside
for Ag/Forestry
abatement projects,
and 1% are set aside
for landfill and coal
mine CH4 abatement
projects.
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Quantity of Offsets Under S. 2191
Offsets, International Credits, and Allowance Set-Asides
Payments
(Billion '05$)
2030
$12 • 10’s of Coal Mine
Methane Projects
$2
$1
Ag / Forestry
Landfill / Coal Mine CH4
Other Offsets
MtCO2e
2030
476
93
27
Domestic Offset Total
596
$15
Allowance Set-Asides
Ag / Forestry
Landfill / Coal Mine CH4
193
39
$16
$3
Allowance Set-Aside Total
232
International Credits
International Credits Total
• 10,000,000’s of
$19
acres of ag /
forestry projects
596
$12
Domestic Offsets
• 100’s of Landfill
Methane Projects
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Observations
• Offsets reduce the cost of policy implementation.
• Effective program implementation is key to ensuring the
benefits of offsets.
• Key elements include:
– Efficient project certification/processing
– Assessment of environmental integrity
• If the tons are additional, offsets provide the same level of
climate protection.
• If not, costs are reduced but environmental integrity is
compromised.
• Set-asides may increase costs, as compared to offsets, but
additionality is not an issue (because the tons used for
crediting come from under the cap).
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Contact Information
Dina Kruger
Director, Climate Change Division
U.S. Environmental Protection Agency
E-mail: [email protected]
Telephone: 202-343-9039
www.epa.gov/climatechange
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