Global climate, energy, and economic implications of international energy offsets programs

Abstract

We demonstrate and apply methods for assessing global, system-scale effects on energy and greenhouse emissions of offset programs that explicitly consider the rules by which energy-based offset credits are awarded. We compare our approach to idealized calculations in which all regions, including those without mitigation obligations, face a common carbon tax. We find a substantial gap between potential reductions in emissions and those realized in a suite of hypothetical offset assignment protocols as well as between offset creation and system-scales emissions mitigation, even when project-scale additionality and compliance issues are absent and baselines are known with certainty. In the worst cases, seemingly reasonable rules were counterproductive—i.e. increased global carbon emissions, despite strictly meeting additionality and baseline requirements. But, even when we modified the rules for creating offsets to reflect more closely implementation practices, there remained a large gap between potential and realized mitigation. This difference is systemic and traces to the basic nature of offsets. Offsets subsidize the deployment of non-emitting technologies instead of penalizing the use of emitting technologies. As a consequence, offsets lower the cost of energy, and encourage greater use energy rather than its conservation. Thus, even in well-crafted programs, it is impossible to capture the full economic potential because the program lacks a means by which to engage energy conservation. We demonstrate that while offsets programs reduce the cost to regions with emissions caps, they may achieve this result at the expense of reduced global emissions mitigation.