2009.07.16 - Electric Power Daily- Group Seeks to Expand RGGI Offset Types Press

The following article was originally published in Electric Power Daily on July 16, 2009. Full text available through www.platts.com.

Group seeks to expand RGGI offset types

Three additional forestry-based carbon dioxide offset types
should be considered for use in the Regional Greenhouse Gas
Initiative, which would have the added benefit of providing a
model for a federal forestry offset program, according to
recommendations filed Wednesday by the Maine Forest Service,
Environment Northeast and the Manomet Center for
Conservation Science.

“We have submitted detailed recommendations to RGGI that
will add three new forest management categories to the offset
program and provide incentives for landowners to manage their
lands for forest carbon,” said MFS Director Alec Giffen in a
statement. “It is time to acknowledge the huge role our region’s
forests play in storing carbon and combating global warming.”
Giffen noted that, “We have set out specific protocols to
make sure that these new forest offsets will meet the RGGI ‘five
part test’ — meaning that they provide emissions reductions
that are additional, measurable, verifiable, permanent and
enforceable. This is essential so that offset purchases bring about
real GHG reductions and don’t just serve as a way for emitters
to get around the [188 million short-ton greenhouse gas] cap.”
Under the 10-state cap-and-trade program that started
January 1 among power generators, CO2 emitters can meet their
emissions reduction requirements by purchasing offsets
generated from different types of projects, including landfill
methane capture, SF6 reductions, avoided methane production
from agriculture operations, and emission reductions from
natural gas, oil, or propane end-use combustion due to end-use
energy efficiency in the building sector.

RGGI administrators currently only allow forestry offsets related
to afforestation or tree planting projects as the fifth and final
category. The recommendations would add forest management,
avoided deforestation, and urban and community forests as
allowable offsets. The recommendations also spell out a detailed
framework for implementing registration of these offset types.
“Forests absorb 12% of New England’s current annual carbon
emissions and the US Environmental Protection Agency estimates
that this forest carbon storage capacity could be doubled,” said
ENE Executive Director Dan Sosland in a statement.

“The bottom line is we cannot solve global warming without
safeguarding our valuable forestlands and enhancing their carbon
sequestration capacity. Forest offsets will play a critical role not
only in the RGGI region but nationally, and our proposal sets a
firm foundation for a credible and effective approach.”

Giffen also hoped that the recommendations would be “a
detailed roadmap regarding how to implement a successful forest
offset program” as deliberations continue on a federal cap-andtrade
scheme. The US House of Representatives June 26 approved
a bill (H.R. 2454) that would open a cap-and-trade program with
a 2 billion metric-ton offset cap and create domestic and
international forestry offset programs. The domestic program
would allow offsets for afforestation, urban tree planting,
improved forest management, similar to the recommendations.
“We feel confident that these recommendations provide a
sound model for both a regional and federal offset program.
Offsets are limited in RGGI to only 3.3% of the cap on
emissions, but the [House] bill allows an enormous number of
offsets, making rigorous standards even more essential to the
integrity of the program,” he said.

The forest carbon offset recommendations are the
culmination of a two-year process started in 2007 at the request
of the RGGI Staff Working Group. “These recommendations are
relayed to the participating states for their review, according to
each state’s CO2 Budget Trading program. The ten participating
RGGI states are cooperating in evaluation and analysis of these
kinds of recommendations, and that will happen through a
group of state agency staff focused on offsets,” said Jonathan
Schrag, RGGI executive director, when asked if these offset types
would be adopted.

RGGI June 30 began taking consistency applications from
developers of offset projects commenced between December 20,
2005, and December 31, 2008. Monitoring and verification
reports also were due by June 30. RGGI’s web site as of Tuesday
had yet to show that any projects had completed the
consistency application review.

In the meantime, the question over the need for offsets by
generators remains as RGGI allowance prices have remained
low. RGGI’s last auction, held June 17, valued 2009 compliance
allowances at $3.23/short ton, far below the $5-15/metric ton
range for offsets in the voluntary US market and what is needed
to spur investment in offset projects.

Issued last May, a voluntary carbon market report by
Ecosystem Marketplace and New Carbon Finance found that the
average price for voluntary offsets in 2008 increased 20% to
$7.34/mt from the 2007 average. And as another example, the
Chicago Climate Futures Exchange’s futures contracts for
California Climate Action Registry-certified offsets were valued
as of Tuesday at between $5.00/mt and $6.50/mt.
— Christine Cordner