The North American Carbon Offsetting Approach: Regional and Voluntary

When it comes to North America and carbon offsetting, the first fact that usually comes to mind is that the United States never ratified the Kyoto Protocol. Furthermore, in December 2011, as the UN Climate Conference concluded in Durban, Canada announced its highly controversial decision to withdraw from Kyoto. Therefore, in terms of compliance carbon trading, both the United States and Canada have a lot to catch up in comparison to Europe. However, a new report released on 1 March 2012 by Ecosystem Marketplace shows that failing to establish compliance regimes on a national level in the United States for instance has not prevented several states from incorporating climate change initiatives into their state and regional policies, with California’s recently launched cap-and-trade system being the most prominent example.

Unlike Europe with its EU Emissions Trading System (EU ETS), which happens to be the most advanced carbon trading mechanism in the world, in North America there is no unified compliance approach in terms of carbon offsetting. One of the first regional climate action solutions adopted in the United States is the Regional Greenhouse Gas Initiative (RGGI), a collaboration effort of nine north-eastern states, aiming to reduce CO2 emissions from the power sector with 10 percent by 2018. The RGGI, however, so far has not had great deal of success since its targets are relatively easy to meet.

The RGGI is not the only North American effort for GHG emissions reductions. The new report of Ecosystem Marketplace entitled “Bringing it home: Taking Stock of Government Engagement with the Voluntary Carbon Market” lists the 13 most advanced voluntary climate change initiatives in the world, among which are those of Oregon, California, Oklahoma and the Canadian province of British Columbia.

According to the report, the different states have adopted different approaches with regards to their respective regional realities. The California cap trade system, similarly to the EU ETS, is based on the allocation of allowances to the different industries included in the regime, and the subsequent carbon trading. Unlike the RGGI, the California programme relies on more rigid targets, namely a reduction of emissions to 1990 levels by 2020 and achieving an impressive 80 percent reduction below 1990 levels by 2050. The number of California Carbon Allowances (CCAs) allocated for free will be gradually reduced over time in order to enforce emission limits, as is also the case with the EU ETS. Among the greenhouse gas emitters covered in the California ETS are power plants, refineries and transportation fuel suppliers. Furthermore, in spite of being more compliance-oriented, the California programme also incorporates some voluntary elements, as Ecosystem Marketplace reports that it is currently in the process of selecting a voluntary-market registry so as to keep track of credits once they are issued.

And while the California cap and trade system imposes a mandatory emissions cap, this is not the case in Oklahoma, where participation is voluntary. The Oklahoma Carbon Programme offers third party certification verification of carbon credits to participating aggregators who hold carbon contracts with agriculture producers and forest landowners. According to Stacy Hansen, director of the Oklahoma Conservation Commission, as quoted by Ecosystem Marketplace, people appreciate the non-regulatory approach adopted by the Oklahoma Carbon Programme.

Besides the individual programmes of the different states, another carbon offsetting scheme in North America is the Western Climate Initiative (WCI), which is a collaboration of several US states and Canadian provinces working together to tackle climate change on a regional level. It is likely that in the future the WCI will also link with the California ETS.

The North American approach to climate action is to a certain extent similar to the carbon trading mechanism existing in Japan, which also relies on voluntary efforts for reducing emissions through the Japanese Verified Emission Reduction (J-VER) Scheme. Such programmes are considered to be quite innovative since the voluntary approach or the combination of compliance and voluntary elements provides more flexibility with regards to carbon offsetting.

The different state and regional initiatives in North America show that sub-national regulations and regional carbon trading schemes are successfully filling the climate action vacuum in the absence of a comprehensive national framework.

Nevertheless, time will show whether those initiatives will remain on a regional level or will be just a step toward a national climate action programmed and compliance carbon market in the United States and in Canada, respectively.

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