States Ask FTC to Develop Guidelines for Climate Offsets

Newsday.com / Associated Press For the 2/10/08 edition

CARBON COPIES? Leery about the potential for fraud in the carbon offset market, officials in 10 states have asked the Federal Trade Commission to develop guidelines for businesses that sell credits.

Carbon offset is the term applied to credits bought by people and companies to offset their contributions to global climate change by supporting environmental projects.

The inherently intangible nature of carbon offsets and the lack of standards and definitions among those selling them make it hard for consumers to know whether they got what they paid for, according to the attorney general for Vermont, William Sorrell, and his counterparts in nine other states.

The market for carbon offsets has ballooned into a $100 million-a-year business, but it needs regulation, the attorneys general said in a seven-page letter Jan. 27.

Bank of America Backing Away from CCX

Many of you are familiar with the Chicago Climate Exchange (CCX) which is a voluntary climate market in the U.S. and Canada. As a pilot project for understanding carbon trading, CCX has been a very helpful platform. But as we move into the "end game" of climate policy resulting in a mandatory climate market, the forward value of CCX is debatable. This is especially true for the offsets that they offer since these offsets are not measured and therefore, buyers would take on great potential liability from environmental groups that already oppose all forms of offsets if they can not prove how much carbon they have actually reduced through their offset purchase.

The story below talks about Bank of America pulling out of a joint venture they were pursuing to commit to buy more carbon from CCX (for whom National Farmers Union and the Iowa Farm Bureau aggregate soil carbon offsets). There are likely many reasons for this turn of events -- but it brings up an important point to consider as farmers think about their carbon commodity. Why would you sell something that is likely worth 3 times the voluntary market price -- when a mandatory market is just around the corner??

Many farmers may not realize the strong likelihood that mandatory climate legislation will pass in the next 2 years. Businesses, however, are keenly aware of the state of climate policy and politics -- and it strikes me that this may be at least part of the reason why companies are starting to re-evaluate whether it makes sense to continue buying carbon from CCX when there is no guarantee that those reduced tons or offsets will be recognized by the mandatory law. In fact, it is more likely that they will not be recognized.

If you are a farmer -- you have to ask yourself if now is the right time to commit to selling a commodity whose true price is about to be discovered with the creation of a real market with real economy-wide demand.

Sara
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Bank of America pulls out of Climate Exchange Deal

Greenwire 2/7/08

Bank of America has pulled out of an agreed joint venture with Climate Exchange and will not buy $25 million worth of shares in the company, a spokesperson for Climate Exchange said on Wednesday.

Bank of America said Climate Exchange, the company that runs the Chicago and European Climate Exchanges for trading carbon offsets, remains a strategic partner. Climate Exchange said the pair had ditched the venture because it was not needed "to pursue projects of mutual interest."

As part of the venture, Bank of America agreed to market the Chicago Climate Exchange's carbon offsets to its customers on the bank's own trading platform, and it committed to purchasing 500,000 tons of carbon on the CCX over three years. Bank of America said it was no longer obliged to purchase the carbon, but added that it remained committed to reducing its carbon footprint (Bowker/Wills, ReutersFeb. 6).

In July 2007, Bank of America announced that, as part of its $20 billion initiative to support the growth of environmentally sustainable business activities to address global climate climate change, it would join the CCX, making it the largest financial institution to claim membership in the exchange (Greenwire, July 25, 2007). --PR

The Next President WILL support climate legislation

As the tag line of this blog says, if you are not at the table, you are on the menu. Now that Romney has dropped out of the race, its practically a done deal that McCain will be the Republican nominee.

This means that regardless of who wins the presidential election this year, THERE WILL BE CLIMATE LEGISLATION NEXT YEAR !! Check out the quote from someone who worked for Pres. Bush at the White House Council for Environmental Quality -- he's calling it a "certainty."

The time to make sure agriculture gets its carbon market out of this bill is NOW before all the deals are cut and the environmentalists manage to cut ag out of the picture altogether!!
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Environment & Energy Daily

CAMPAIGN 2008: Climate debate shifts as Romney ends White House bid (02/07/2008)

Darren Samuelsohn, E&ENews PM senior reporter

Former Massachusetts Gov. Mitt Romney suspended his campaign for the Republican presidential nomination today, a move that all but guarantees the 2008 general election will feature major party candidates who agree on the need for mandatory limits on emissions of heat-trapping greenhouse gases.

Romney's withdrawal cements Arizona Sen. John McCain as his party's front-runner. During the primary campaign, McCain repeatedly came under attack from Romney over his long-standing position in support of legislation to establish a cap-and-trade system for curbing greenhouse gases.

Appearing at the Conservative Political Action Committee's annual conference in Washington, Romney said the need for unity among Republicans led him to leave the presidential race.

"If I fight on in my campaign, all the way to the convention, I'd forestall the launch of a national campaign and make it more likely that Senator Clinton or Obama would win," he said, referring to the two leading Democratic candidates, New York Sen. Hillary Rodham Clinton and Illinois Sen. Barack Obama.

McCain spoke two hours later. Without mentioning his position on global warming, which has been unpopular with conservative Republicans, the four-term senator acknowledged his stance on many issues has often put him out of step with his party's core constitutency.

"It is my sincere hope that even if you believe I have occasionally erred in my reasoning as a fellow conservative, you will still allow that I have, in many ways important to all of us, maintained the record of a conservative," McCain said.

'With what conditions?'

McCain's emergence as the likely Republican nominee sets up an intriguing dynamic for the general election.

Robert Stavins, a Harvard economist who tracks climate issues, said the basic agreement among McCain and his Democratic opponent on global warming could push the topic to the back of the debate agenda.

"It's good news for policy, it may not be good news for the drama of politics," Stavins said.

Still others see McCain's success as another sign that the United States within the next three years will set a mandatory limit on greenhouse gases.

"I've long thought it was very likely that we would have a climate bill of some sort in 2009 or 2010," said Sam Thernstrom, a former spokesman at the White House Council on Environmental Quality who now works as a scholar on environmental issues at the American Enterprise Institute. "McCain's nomination now makes that almost a certainty."

Yet McCain and his climate change position still remains a question mark in some eyes as rank-and-file Republicans start to define his campaign.

"He was specific enough for a Republican primary to distinguish himself from the other Republicans in the race," said Tony Massaro, senior vice president for political affairs at the League of Conservation Voters. "But over time, he's going to have to spell out even more for this to be the kind of thing that really propels it forward in a landmark way."

National Mining Association spokesman Luke Popovich predicted the climate debate was far from over.

"It's fair to say all the candidates that appear to be in the running favor mandatory controls," Popovich said. "But the question is going to become, 'With what conditions?'"

Popovich added, "That's where I think logic and fact have to have the opportunity to carry the day here, so that in the end we have a president who understands the limitations of this rhetoric and now starts figuring out how we make controls consistent with common sense."

Former Arkansas Gov. Mike Huckabee and Texas Rep. Ron Paul remain in the Republican presidential contest, but neither is expected to pose McCain with a significant challenge. Primary and caucus contests continue Saturday in Louisiana, Kansas and Washington state.

Confronting the "Polluter Giveaway" MYTH

Yesterday, I laid forth my disgust at what Friends of the Earth and Greenpreach -- oh I mean Greenpeace are doing to shut down the only bi-partisan climate bill with both environmental integrity and a real political shot of passing any time soon. I received a comment from Friends of the Earth - which I encourage you to read. One of their responses was the same old tired refrain I've heard from a lot of groups: the bill "gives away trillions of dollars to polluters."

As a criticism, this is worth discussing -- so lets look at what the bill actually calls for (a refreshing change from the Exxon-FOE-Greenpeace mantra on this issue).

One man’s “giveaway to polluters” is another man’s “transition assistance.” The Lieberman-Warner bill (S.2191) devotes 8% of the cumulative value of allowances from enactment though 2050 to transition assistance (“giveaways to polluters”). The remaining 92% goes to state governments, energy consumers, wildlife adaptation, farmers and foresters, etc. The attached chart (also posted here: http://lieberman.senate.gov/documents/acsaemission.pdf) shows three snapshots of the allocation system over time (2012, 2022, and 2031).

By 2031, polluters are not receiving any free allowances. The economic modeling shows that if you do not provide regulated entities with a substantial amount of free allowances in the early years of the program, before the advanced energy technologies have had a chance to deploy widely, then the program will be substantially more expensive for energy consumers and others.

Another good perspective can be found from a blog comment left by Anthony Kriendler of Environmental Defense (below). You can Click Here to see the whole string of discussion.

As passed by committee, the bill only allocates 49 percent of allowances to regulated entities, and we get to full auction by 2031. There are a lot of good arguments for increasing the rate at which CSA moves to 100 percent auction, and there are a lot of good arguments for why that might not be achievable politically. In the end though, without a cap on emissions, there are no allocations to make, no auctions to have, and no greenhouse gas reductions. And that's what we're all working for here: reducing emissions. -- Environmental Defense

Environmentalists Against Actually Solving Climate Change!

Ok - so the title should be Some environmentalists -- but that isn't as eye-catching.

There is a story out today in some of the environmental trade press talking about Friends of the Earth (FOE) and Greenpeace now opposing the Lieberman-Warner bill because its too moderate. It has enough environmental rigor for Sen. Barbara Boxer (D-CA), but that's not enough for these guys -- who have actually gone after Boxer for not being green enough -- if you can imagine that?

I did a whole big firey post about all this -- including the trade article on my other blog that talks about bringing pragmatism into environmental and energy policy. I urge you to read all about it at: http://ecopragmatism.blogspot.com/

This ties into the ag offsets issue because part of what these groups want to "fix" about the Lieberman-Warner bill is getting rid of the offsets program.

Just more reason to get into this issue and define it from a pro-ag point of view!

Sara

A Cautionary Tale from Kansas

Right now the Kansas State Legislature is moving a bill that would, among many other things, result in a price cap on soil carbon sequestration offsets of $3/ton. This is part of a compromise that has emerged to allow a new coal-fired utility to be built in the state while trying to address the GHG emissions that led to the plants permit originally being denied by the Governor.

The good news is that ag carbon offsets would be allowed as a means for the utility to reduce its carbon burden.

But the bad news FAR outweighs the good -- the KS state bill sets the price of carbon offsets at a mere $3/ton of carbon. This is NOT a market price since there is no outright cap-and-trade plan in the bill -- it is essentially a carbon tax. By capping the price of sequestration offsets so low, there is no way they will be measured in a way that justifies the actual offset of emissions. So, this will become just another example used against offsets as not being "real" or "measured" by those enviro groups who oppose ag offsets in national climate legislation.

On top of that, any KS farmer that sells their carbon to the state now IS MISSING OUT on a likely three-fold expansion of the carbon commodity price coming within the next few years when national climate legislation is enacted.

In my mind - this is a case of some good intentions gone bad. The desire to include agriculture in the solution to reduce emissions is terrific, but agriculture needs to be paid FAIR MARKET VALUE for the carbon commodity it will provide -- not accept some randomly picked number as the value of carbon.

Again - this is an example of why it is so crucial to be involved with the process of writing the offset language and how it connects with the underlying bill.

Sara

Questions & Answers

There are still a number of folks with questions about how the whole ag offset market would work. So, I am putting up a link to a fact sheet I prepared while I worked at Environmental Defense that answers a number of the questions I've heard posed about ag offsets. To access the document, click here.

Please leave your comments on the board and let me know other specific questions you have.

Sara