Why the House is Off on Offsets
So the House of Representatives won’t go carbon neutral, after all. Its decision could portend poor treatment for carbon offsets in the upcoming debate over climate change legislation.
The House’s decision came after its leadership dropped an essential part of the plan to purchase carbon offsets. The House reportedly paid $89,000 for offsets from the Chicago Climate Exchange to cover its 2007/2008 emissions. (Most of those emissions come from steam heat generated by the ancient coal-burning Capitol Power Plant that inspired a protest Monday, hailed the largest act of civil disobedience against coal.)
The House’s decision appears to be rooted in a misunderstanding of offsets. Leaders are uncomfortable with them, according to the Post, because "the money was funneled to [offset projects] that had been completed before the House paid a cent." The Post continues: "Experts said those issues make it hard to say that the House's money had caused the environmental benefits the chamber paid for." Rep. Dan Lungren (R-CA) is quoted as saying, "Maybe they're admitting that what we did [in purchasing offsets] was actually nothing."
This reveals a fundamental misunderstanding of offsets and how they work.
The conceptual advance of the offset is that it commodifies an emissions reduction.
It entices the entity reducing emissions with the prospect of creating a commodity that will be worth more than the cost of actually reducing the emissions. As a result, you have a lot of people investing in emissions reductions projects and “banking” the offsets they create. Why? Because they believe the price of that reduction will be worth more in the future than it is today. Or they may sell it to someone else who wants to hold it.
That, in a nutshell, is the "trade" part of cap-and-trade works, and it is the mechanism that allows the profit motive to drive carbon reductions.
The House appears to be struggling with this basic logic and that should worry offset advocates in the coming debate over climate change legislation.
