Cap-and-trade mirage

What guarantees failure of the proposed climate bills, however, are their provisions for carbon offsets, a concept not used in the acid rain program. Both bills allow all required greenhouse-gas reductions for almost 20 years to be met with carbon offsets rather than actual reductions in use of the capped sources. Offsets -- considered indispensable to keeping cap-and-trade affordable -- are supposed to be "additional" reductions beyond what is legally required. But experience with offsets in Europe and California has shown that ensuring real "additionality" is not an achievable goal. Suppose, for example, that a landowner is paid not to cut his forest so that it can continue capturing carbon dioxide from the atmosphere. Purchasing this offset allows owners of a coal-fired power plant to burn extra coal, above the cap. But if the landowner wasn't planning to cut his forest, he just received a bonus for doing what he would have done anyway. Even if he was planning to cut his forest and doesn't, demand for wood isn't reduced. A different forest will be cut. Either way, there is no net reduction in production of greenhouse gases. The result of this carbon "offset" is not a decrease but an increase -- coal burning above the cap at the power plant. Or consider the refrigerant HCFC-22, the manufacture of which creates an extremely powerful greenhouse gas as a byproduct. This byproduct is relatively easy and cheap to destroy, and governments could require refrigerant manufacturers to do just that. But offset investors have persuaded regulators to approve destruction of the byproduct as a carbon offset, making it twice as profitable to sell byproduct destruction as it was to sell the refrigerant. Some have even fought to keep release of this byproduct legal because, otherwise, destruction of the byproduct would no longer produce offsets as it would no longer be "additional." The situation also creates incentive for some to make unneeded refrigerant to profit from byproduct offsets...read more