Implications of international GHG offsets on global climate change mitigation

Abstract

With the United Nations Framework Convention on Climate Change (UNFCCC) Agreements reached in Cancún, Mexico, in December 2010, the future role of international GHG offsets in climate action has become particularly uncertain. One of the more vexing questions is: how offsets will be accounted for in reporting and reviewing progress toward meeting countries’ emission-reduction pledges under the Cancún Agreements. This article quantifies the implications of double-counting international offsets by constructing and applying a model to analyse how potential offset supply and demand balances may evolve, based on specific assumptions about accounting rules, offset mechanisms, and country pledges for the year 2020. It is found that extensive use of international offsets, if counted both by the supplying (developing) and buying (developed) country, could effectively reduce the ambition of current pledges by up to 1.6 billion tonnes CO2e in 2020, suggesting that the current pledges could well fall even further short of the abatement needed to stay on a path consistent with limiting warming to 2 °C or 1.5 °C. If offsets do not represent additional reductions, then the dilution of pledges could be even greater. Possible remedies are described to address the risks of offset double-counting. Policy relevance This article finds that international GHG offsets could play a significant role in meeting developed-country pledges in 2020 – providing abatement to these countries exceeding 1 GtCO2e. Yet significant decisions remain that will substantially determine whether offsets will contribute productively to meeting a global mandate to reduce emissions on a pathway consistent with limiting warming to 1.5 °C or 2 °C. The prospect of double-counting is a loophole that could weaken the lower end of pledges by as much as 1.1 GtCO2e, and on the higher end of pledges by as much as 1.6 GtCO2e, significantly diluting the ambition of the Cancun Agreements. Coupled to this is the possibility of considerable non-additional credits, which could lead to the further weakening of pledges. Upcoming negotiations under the UNFCCC process will provide the opportunity to address these concerns directly.