A Barclays Capital analyst has reported that domestic deals to convert barren land into forests and to maintain them could potentially supply 60% of available offsets in any US cap-and-trade plan on greenhouse gas emissions.
Trevor Sikorski, a London based director of carbon markets at Barclays said in a research note that the overall supply of domestic offsets could hit 250 million short tones annually by 2020. The note also said that US forestry and agriculture projects could supply 150 million short tones of those offsets by 2020.
“Given the political importance of forestry and agriculture in the United States … (such) offsets will be included in any federal cap-and-trade system,” Sikorski said.
Rather than cut their own emissions polluters that are part of the European Union cap and trade market have the option to invest in offsets. Alternatively they can also invest in off site projects such as the destruction of refrigerant gases that are highly potent greenhouse gases or in small hydropower systems to generate clean electricity.
A climate and energy bill is currently being crafted by US Senators Lindsey Graham, a Republican, Joseph Lieberman, an independent and John Kerry, a Democrat and is scheduled to be released on 22nd April, which coincides with the 40th anniversary of Earth Day. The bill will need 60 votes in the Senate in order to be passed but with opposition from states with economies that depend on fossil fuels it is uncertain whether it will be passed.
To cover any loss of carbon stock from individual projects, Sikorski suggested that a buffer stock of credits could be used. Loss of carbon stock could come from forest fires, pests and illegal logging. Critics of forestry offsets dispute that the health of a forest is hard to guarantee for the number of years some greenhouse gases remain in the atmosphere. Because of this, they argue, forestry offsets don’t represent high quality carbon reductions.
So far the senators have not revealed how they would treat offsets in the bill. In the new bill carbon caps would only be put on the utility sector at first, which would mean that offsets would have a reduced role than previously proposed. According to the details of the compromise Kerry-Graham-Lieberman bill, emissions from manufactures would be capped by 2016.
One point to keep in mind is that due to limits to the domestic supply of US offsets it may be necessary for the compromise bill to allow the use of international offsets. Last June the Waxman-Markey bill that managed to pass the House of Representatives allowed 2 billion short tones of offsets a year divided equally between domestic and international ones. Last year’s Kerry-Boxer bill would allow 1.5 billion short tons of domestic offsets and 0.5 billion short tons of international ones.
For more information on investing in Forestry please click here
April 20th, 2010 at 2:53 PM
[...] This post was mentioned on Twitter by The Katoomba Group. The Katoomba Group said: #US #Carbon Plan Focuses on #Forestry – http://ow.ly/1Abn3 #redd #forests [...]