Originally published in Carbon Market North America,
vol. 5, issue 32, August 13, 2010
Emissions offset systems have become a favored method of
containing the compliance costs of cap-and-trade systems. By
allowing covered firms to purchase credits from emissions reduction
projects outside the capped sectors, regulators can broaden the
participation in the mitigation effort while reducing its net
cost.
However, the use of offsets can present challenges. Under the
clean development mechanism (CDM), the world's largest offset
system, not all of the credited projects have proven to be
additional. Some have ramped up production of industrial gases just
to earn offset credits for destroying the byproducts. Some
hydropower projects have received credits even though they were in
development prior to the CDM's inception. Crediting these
projects can not only subsidize business-as-usual behavior, but
also raise environmental integrity concerns if the credits are used
to
