The Obama Administration last week released proposed rules for power plant emissions that are intended to be as flexible as possible while still being legally defensible. The news boosted allowance prices in the Regional Greenhouse Gas Initiative while California and Quebec announced preparations for their first joint auction in November. Meanwhile, China is exploring ways to convert CDM offsets for use in their domestic emission trading systems.
This article was originally posted in the V-Carbon newsletter. Click here to read the original.
13 June 2014 | North American offset project developers hoping for a boost from US federal regulations for reducing carbon pollution had those hopes dashed last week when the Environmental Protection Agency (EPA) released its proposed rules for emissions reductions from existing power plants.
California and the nine Northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) turned out to be big winners as the EPA heeded calls to give state and regional cap-and-trade programs a compliance role in its proposed rules, which aim to lower carbon pollution from these plants by 30% from 2005 levels by 2030. But carbon offset projects were not as lucky because the EPA could not find a place for them as a compliance mechanism, meaning these states must be able to show they can hit the federal program’s targets with direct reductions from the power sector.
“I see that as a conservative choice on EPA’s part,” said William Shobe, an economist and professor at the University of Virginia who helped design the original RGGI program. “It doesn’t want to have the whole program overturned by going out on a limb and allowing offsets in the program.”
Carbon offsets can continue to exist as a compliance option within state and regional programs, as they do in California and RGGI. Allowance prices in the RGGI program have been too low to spur development of carbon offsets, although they spiked to record highs last week based on the EPA announcement. California’s carbon offset program is much more active, with the California Air Resources Board (ARB) issuing nearly 8.8 million offsets to date under its forestry, livestock and US ozone-depleting substances (ODS) protocols.
But it’s not all sunshine and rainbows out in California. The ARB – the state agency charged with ensuring the integrity of the state’s cap-and-trade program – is reviewing emissions reductions generated at an Arkansas facility that may have been in violation of its federal permit. Transactions involving ODS offsets generated by projects at the facility have ground to a halt until the “disruptive” review is complete, as the regulators could potentially invalidate the offsets.
“It’s a very important development in the offset market and it very clearly demonstrates the ARB is taking its authority to invalidate offsets quite seriously and will use it when appropriate,” said Julian Richardson, CEO of Parhelion Underwriting, a specialty insurer focusing on the climate finance sector that has developed a policy to cover the invalidation risk in California’s offset program. “In this instance, we don’t know the full details. Certainly the potential impact is that if all of these offsets are invalidated, that’s a very serious issue.”
Ecosystem Marketplace’s State of the Voluntary Carbon Markets 2014 report will discuss the impact of the transition of carbon offsets from the North American voluntary market into California’s compliance program, as well as provide critical information on voluntary carbon markets in other regions of the world. We invite you to join us either in person or via webcast for the launch of the full report on June 24 in Washington DC from 4:30-6:00 EDT.
To register for the event, please RSVP with full contact details to firstname.lastname@example.org. Space is limited and early registration is encouraged. If you are unable to attend in person, register for the live webstream.
These and other stories from the voluntary carbon marketplace are summarized below, so keep reading!
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