First Name | Laurie & Allan |
---|---|
Last Name | Williams/Zabel |
Email Address | williams.zabel@gmail.com |
Affiliation | Citizens Climate Lobby & as Individuals |
Subject | Comment on Proposed GHG Offset Protocols |
Comment | Comment submitted December 13, 2010 COMMENT ON PROPOSED ADOPTION OF A CALIFORNIA CAP ON GREENHOUSE GAS EMISSIONS AND MARKET-BASED COMPLIANCE MECHANISMS REGULATION, INCLUDING COMPLIANCE OFFSET PROTOCOLS – IMPLEMENTATION OF AB32 Comment by Laurie Williams & Allan Zabel on behalf of themselves as private citizens of California and as volunteers, writing on behalf of Citizens Climate Lobby, a non-profit organization located in San Diego, California, asserting that adoption of the proposed offset protocols is arbitrary and capricious and contrary to the intent and requirements of AB 32, the California’s Global Warming Solutions Act of 2006. Overall Point – AB 32 requires that greenhouse gas (“GHG”) offsets be “real, permanent, quantifiable, verifiable, enforceable, and additional.” Adoption of the proposed Offset Protocols by the California Air Resources Board is arbitrary and capricious and should be rejected because the protocols for proposed GHG offsets cannot meet these standards. In addition, to the extent that GHG offsets are not additional, they destroy the integrity of the entire program by allowing additional GHG emissions from the capped sector above the “cap” that will not be offset by additional emission reductions elsewhere. Finally, because California’s program is looked to as a model and proof of concept, adoption of this flawed mechanism would be extremely damaging to national and international efforts to effectively reduce GHG emissions. Adoption of GHG offsets as part of the California program would serve as a template for such programs, encouraging others to pursue this flawed approach to the most urgent problem facing humanity, increasing the chances of catastrophic climate change, and defeating the stated purpose of AB 32. Under the proposed action, “covered entities can use offset credits to satisfy up to eight percent of the entity’s total compliance obligations.” See Notice of Public Hearing at p. 5. This 8% of the compliance obligation is very significant percentage of the total reductions sought. Fatal Flaws of GHG Offsets - To be credited as an offset, the staff report states that a project “must also be additional to what is required by law or regulation or would otherwise have occurred.” See ARB Staff Report, page 35 of 472. (Emphasis added.) Our analysis focuses primarily on the latter requirement. As demonstrated in our Whistleblower Disclosure (“Williams/Zabel Disclosure”), dated July 22, 2010 (http://www.carbonfees.org/home/Whistleblower_Disclosure_to_Congress_7-21-10.pdf ), GHG offsets of the type that ARB proposed to adopt are fatally flawed and cannot be fixed. There is no reliable way to distinguish offset projects which will occur because of the offset incentive from those which would have happened anyway because of the following four unfixable flaws of GHG Offsets: • Additionality: Whether reductions outside the capped sector are additional is necessarily a hypothetical inquiry and such an inquiry cannot reliably distinguish business-as-usual. Specifically, it is impossible to know what “otherwise would have occurred” and therefore it is not possible to create an offset program that reliably excludes business-as-usual activities from being counted as “additional.” (See U.S. Government Accountability Office discussion below, confirming this conclusion.) • Leakage/Shifting Economic Activity: In some cases, such as in the context of forestry projects, the offsets will fail to appreciably mitigate demand and the polluting activity (such as logging) will simply shift elsewhere; • Perverse Incentives to Increase Emissions and Keep Them Legal: GHG offsets create perverse incentives to keep polluting activities legal and in some cases to increase them, so they can keep being sold as offsets (Note: this dynamic is recognized in the Ozone Depleting Substances (“ODS”) Protocol re: HCFC-22 by-product HFC-23 destruction in the United Nations Clean Development Mechanism (“CDM”), see ODS Protocol at p. 11 of 67); and • Unenforceable: The complexity and subjectivity of offsets renders them impossible to certify, regulate or enforce. As explained in our discussion below of each of the four proposed offset protocols suffers from one or more of these flaws and would result in approval of non-additional projects in violation of AB 32. As a result, it would be arbitrary and capricious to adopt the proposed GHG offset protocols as part of the proposed cap-and-trade program See also, U.S. Government Accountability Office, March 2009 ―Observations on the Potential Role of Carbon Offsets in Climate Change Legislation‖ at p. 12, GAO-09-456T (http://www.gao.gov/new.items/d09456t.pdf). “Because additionality is based on projections of what would have occurred in the absence of the CDM [United Nations Clean Development Mechanism], which are necessarily hypothetical, it is impossible to know with certainty whether any given project is additional.” (Emphasis added.) Keeping Our Eyes on the Wrong Ball - Offsets are described in the Staff Report as a “cost containment mechanism,” which offers additional low-cost emissions-reduction opportunities. See Staff Report at page 14 of 472. However, cost containment interferes with another goal cited in the Staff Report -- to “stimulate investment in clean and efficient technologies.” See Staff Report at page 11 of 472. Keeping the price of fossil fuel emissions lower by allowing offsets delays investment in clean energy technologies and energy efficiency by keeping fossil fuels cost competitive. As a result, such “cost containment” defeats the goal of a rapid transition to clean energy and energy efficiency. See http://www.carbonfees.org/home/Cap-and-TradeVsCarbonFees.pdf Critique of Proposed GHG Offset Protocols for AB 32: The four offset protocols proposed for adoption by the ARB are Livestock Manure (Digester) Projects, U.S. Ozone Depleting Substance Projects, U.S. Forest Projects and Urban Forest Projects. We provide a specific critique of why each of the protocols cannot meet the AB 32 requirements below: (1) Livestock Manure (Digester) Projects The digester performance standard contradicts AB 32 requirement of additionality: As noted above, key element of additionality is that the project is additional to what “would otherwise have occurred.” See ARB Staff Report at p. 35 of 472. a. Significantly Better Than Average: The offset protocol for Livestock Manure Digester Projects fails to meet this standard of additionality by having a performance standard that allows all such digesters to be offsets on the basis that a digester “is significantly better than average.” See Livestock Protocol at p. 9 of 68. Thus, the protocol redefines “what would have occurred otherwise” to include what is already occurring at some facilities. “Data shows that California livestock operations (dairy, in particular) manage waste in a manner primarily in liquid-based systems that are very suitable for digesters. Yet even in these favorable conditions digesters are found on less than 1% of the dairies,” (Id.) (however, the majority of the farms that currently have digesters are significantly larger than the average California dairy.) b. Evidence that Digester Projects Can Be Profitable Without Offset Payments: A December 2009 announcement by the U.S. Department of Agriculture and the U.S. Department of Energy indicates that “Currently, only about 2% of U.S. dairies that are candidates for a profitable digester are using the technology, even though dairy operations with anaerobic digesters routinely generate enough electricity to power 200 homes.” See, http://apps1.eere.energy.gov/news/news_detail.cfm/news_id=15685. The Department of Energy has confirmed that “A biodigester usually requires manure from more than 150 large animals to cost effectively generate electricity. Anaerobic digestion and biogas production can also reduce overall operating costs where costs are high for sewage, agricultural, or animal waste disposal, and the effluent has economic value. In the United States, the availability of inexpensive fossil fuels has limited the use of digesters solely for biogas production. However, the waste treatment and odor reduction benefits of controlled anaerobic digestion are receiving increasing interest, especially for large-scale livestock operations such as dairies, feedlots, and slaughterhouses.” See, http://www.energysavers.gov/your_workplace/farms_ranches/index.cfm/mytopic=30005. c. Existing Projects: The proposed program appears to allow existing digester projects to count as additional to what “otherwise would have occurred.” The ARB staff report states, “The proposed regulation also includes a process for offset credits from qualified existing offset projects operating under specific offset protocols to be accepted into the compliance offsets program.” See ARB Staff Report at p. 78 of 472. This feature means that existing projects -- project that are currently in progress – can be counted as additional to “would otherwise have occurred.” The net result is a system that allows profitable, existing projects and approaches to methane reduction to be used to allow emissions above the cap in the allegedly “capped” sector. d. Perverse Incentive to Increase Emissions (Digester Offsets May Increase Emissions and Cause Other Environmental Harm): The ARB Livestock Manure Protocol Report notes that “The installation of a BCS [Biogas Control Systems] at an existing livestock operation where the primary manure management system is aerobic (produces little to no methane) may result in an increase of the amount of methane emitted to the atmosphere. Thus, the BCS must digest manure that would primarily be treated in an anaerobic system in the absence of the project in order for the project to meet the definition of an offset project.” See Livestock Report at p. 19 of 68, FN 5. This footnote provides an important admission that proposed Digester Protocol may encourage an increase in emissions as a means to gain offset payments. Specifically, manure could be, and sometimes is, processed in an aerobic environment, producing little to no methane. An example is that manure can provide valuable fertilizer to farming operations and be used instead of petrochemical fertilizers. However, by creating the offset program, ARB may encourage facilities to first switch from an aerobic to an anaerobic process (and hence increasing methane), so that their farm can qualify to participate in obtaining offsets. This decision could also lead to increased use of petrochemicals and other environmental harm. e. Perverse Incentive to Keep Methane Emissions Legal and Prevent Regulatory Evolution: In addition to potentially encouraging a move to anaerobic conditions so that a dairy would qualify for offsets, the Digester Protocol also creates an incentive for additional market participants to oppose regulation that would require either aerobic treatment or an anaerobic digester. As noted with respect to the other Protocols and in the Williams/Zabel Disclosure, normal regulatory evolution would move in the direction of prohibiting activities that are found to be harmful in significant ways that were not previously appreciated or known. In this case, all facilities that engage in anaerobic storage of manure for more than 150 cows could potentially be required to use a biogas control system and destroy or sell the resulting methane for energy. A law that creates an offset market for this activity creates opposition to a comprehensive regulation that would remove this activity from the offset market and deprive these market participants of the related revenue, creating instead an obligation that has associated costs. The heightened opposition to such regulation should be analyzed as part of “what otherwise would occur,” in order to fully consider whether the proposed offset protocol creates truly additional reductions outside the capped sector. f. Summary: In summary, there are five types of evidence that it would be arbitrary and capricious to approve the proposed Digester Protocol for Offsets: (1) the protocol redefines additional as “significantly better than average,” which clearly includes a type of activity that is already occurring (non-additional) without the offset incentive, (2) the protocol allows offsets for activities that would be profitable even without the offset payment, (3) the protocol allows existing projects to create offsets, (4) the protocol creates a perverse incentive for some farms to increate anaerobic manure storage to increase the chance of offset income, and (5) the protocol increases the incentives for those who profit from the offsets to fight new regulation that would require the capture and/or use of the methane produced by livestock, as this would deprive them of offset profits. In light of these five factors, the degree of additionality created by the Protocol is unknowable and unverifiable and thus fails to meet the required standards for AB 32 offsets. (2) U.S. Ozone Depleting Substances (“ODS”) Projects a. Destruction of ODS from Refrigeration Equipment and Foam: The proposed ODS Protocol would grant GHG offsets for projects which collect and destroy ODS from refrigeration equipment containing ODS and from foam which was manufactured using ODS as a blowing agent. Both the ODS refrigerant and the ODS blowing agent must originate from the United States. See ODS Protocol at sections 2.3.1 and 2.3.2 (p. 22 – 23 of 67). The ODS Protocol contains two major flaws. These flaws would allow potential project operators to receive GHG offsets for claimed GHG emission reductions which are not additional. In addition, the ODS Protocol’s reliance on unverifiable assertions and records generated by the offset project operator would create opportunities for fraud which would be extremely difficult or impossible prove once the fraud was completed. b. Unsupported Assumptions: In explaining how the performance standard of destruction of ODS pursuant to the Protocol would be additional, the Staff Report claims, without providing any supporting citation or materials, that “Data shows that less than 1.5% of recoverable US sourced ODS are destroyed upon end-of-life of the [refrigeration] equipment or [foam] material. This indicates that collecting and destroying the ODS is above and beyond common practice and therefore destruction meets the performance standard.” Staff Report, page 6. In addition, the ODS Protocol assumes that all ODS recovered from refrigeration equipment is reclaimed for further use. ODS Protocol at sections 2.3.1 and 5.1.1. c. Destruction of ODS during Business-As-Usual: The combination of these assumptions is important for claiming that all ODS destroyed pursuant to the Protocol are additional for purposes of generating offsets. If ODS removed from refrigeration equipment is not always reclaimed and reused, but for technical and/or financial reasons is sometimes destroyed, the destruction of this ODS would not be additional because it would occur in the course of business-as-usual. d. Barriers to Reclaiming and Reuse - Title VI of the Clean Air Act: In fact, not all ODS recovered from refrigeration equipment is reclaimed and reused. To be used as reclaimed refrigerant, ODS must meet established specifications under Title VI of the Clean Air Act. To be economically viable as reclaimed refrigerant, ODS removed from refrigeration equipment must not be mixed with other types of ODS and must not be heavily contaminated with oils and other impurities. Either of these problems will most often make the cost of bringing the ODS up to Clean Air Act specification prohibitively expensive. These problems regularly occur and a significant amount of ODS removed from refrigeration equipment is destroyed rather than being reclaimed and reused. The ODS Protocol would allow the generation of GHG offsets from this destruction. e. Barriers to Verification: The ODS Protocol contains two glaring enforcement weaknesses. First, as stated above the ODS Protocol requires that both the ODS refrigerant and the ODS blowing agent destroyed in a project must originate from the United States. This requirement is not practically enforceable. Once the foam or refrigerant is destroyed, it will be virtually impossible for an enforcement inspector to verify or challenge the paper records kept by the project operator. Second, this hopelessly flawed reliance on paper records generated by the self-interested project operator is a hallmark of the entire verification “methodologies” in the ODS Protocol. The temptations for a project operator to exaggerate or outright fabricate records will be enormous. If GHG offset prices come close to the offset prices in the European GHG trading program, destruction of a single pound of GHG could be worth nearly $100. Again, once all the real evidence is gone, e.g., the foam and refrigeration unit are in the landfill and the ODS has allegedly been destroyed, there is little, if any, hope of proving the fraud. f. Emissions Above the Cap: As with the Digester protocol above, the net result of the unverifiable and non-additional offsets that can be created under this protocol is a system that would allow emissions above the cap in the capped sectors. g. Perverse Incentive to Keep Landfill Disposal of Foam Containing ODS Legal: Allowing offsets for ODS destruction from foam may also create additional barriers to passage of appropriate regulations that would require ODS destruction before foam containing these substances could be brought to a landfill. Once an offset activity is profitable, those who are profiting will provide additional resistance to the passage of legislation and/or regulations that could provide an across the board, rather than piecemeal solution. In this sense, the proposed offsets do not meet the standard of additional reductions beyond what would have occurred otherwise. (3) U.S. Forest Projects a. Reforestation, Improved Forest Management and Avoided Conversion: The proposed U.S. Forest Protocol would grant GHG offsets for three types of projects – reforestation, improved forest management, and avoided conversion. This Protocol contains a plethora of very serious flaws. The most serious of these flaws concern the determination of whether any given forest project is additional, i.e., whether the project would have occurred in the course of business-as-usual. For each type of forestry project, the U.S. Forest Protocol established a performance test. If the project meets the applicable performance standard, the project is deemed to be additional. U.S. Forest Protocol at section 3.1.2. (p. 34 of 131.) b. Performance Standard Approach to Additionality and Business-As-Usual : We have set forth an analysis concerning the common failures of a performance standard approach to determining additionality in the Williams/Zabel Disclosure at pp. 9-11. As detailed below, the U.S. Forest Project Protocol includes a number of these failures that result in include projects which would have occurred in the course of business-as-usual. This is because performance standards of this type are, by their very nature, almost always comparisons to projects which have actually occurred. In a market economy, the most advanced methods quite often give the business using them a competitive advantage. This is why these advanced pieces of equipment and methods are most often “significantly better than average” and “better than common practice.” In a market economy, they are the result of business-as-usual. It violates AB 32’s requirement of additionality to grant offsets to such projects. c. Improved Forest Management and the “Common Practice” Performance Standard: The U.S. Forest Protocol for improved forest management projects contains several different performance standard flaws. It relies on calculations that involve mind-numbing complexity and a series of subjective and unenforceable judgment calls. This protocol also relies heavily on “common practice” as its benchmark for additionality. The entire demonstration of additionality is based upon “estimating baseline onsite carbon stocks” and comparing this to “common practice” on “similar lands” in the area of the project. U.S. Forest Protocol at section 6.2.1. (p. 64 of 131.) Since it is impossible to have an objective determination of whether forest management projects are beyond what would otherwise have occurred under this protocol, the offset performance standard clearly fails to satisfy AB 32’s requirements that offsets be “real, permanent, quantifiable, verifiable, enforceable, and additional.” d. Reforestation - “Less Than 10% Tree Canopy Cover” Performance Standards: For reforestation projects, the U.S. Forest Protocol allows two possible performance standards, either of which could lead to the approval of offsets. One of the standards is the there is currently less than 10% tree canopy cover. In this case, the protocol merely states that projects which occur on land that has had less than 10 percent tree canopy cover for the last 10 years are automatically additional. No analysis, data, or rationale is presented for this determination. e. Reforestation - Areas with “Significant Disturbance” - Alternative Performance Standards- “Economic Cost Scenario” or “Historical Not Engaged In or Allowed Timber Harvesting”: For reforestation projects which occur on land which has undergone a “Significant Disturbance” (e.g., fire) projects are additional if they either meet one of two performance standard. For the economic cost scenario (set forth in a two page appendix to the Protocol) or if the “Forest Owner has not historically engaged in or allowed timber harvesting.” U.S. Forest Protocol at section 3.1.2.1. The economic cost scenario approach to additionality appears to very heavily rely on data which either does not yet exist or have not been made public. Twice this part of the Protocol states that certain economic information and assumptions can be found in “the lookup table in the Forest Offset Protocol Resources section of ARB’s website.” U.S. Forest Protocol, Appendix E, p. 103. We were unable to locate this section of ARB’s website. In addition, the second test for additionality contains no explanation or number of years which constitute “historically engaged in or allowed timber harvesting.” It is suggested, by example, that this qualification would apply to municipal or state parks, but this is made clear or exclusive in the Protocol. U.S. Forest Protocol at section 3.1.2.1. This completely subjective “standard” is neither rational nor enforceable. f. Avoided Conversion Projects – Shifting Economic Activity: Finally, for avoided conversion projects (e.g., conversion of forest to commercial, residential or agricultural land), the U.S. Forest Protocol relies very heavily on appraisals of land value in the various land use scenarios. U.S. Forest Protocol at section 3.1.2.3. This approach has two basic problems. First, leaving a forest uncut and unconverted to another use does not necessarily result in fewer GHGs. Forest products exist in a world market. The largest supplier to the U.S. of softwood (used, for example, in building homes), is Canada. If U.S. demand for softwood is not diminished, the forest preserved in the U.S. will almost certainly result in additional timber harvesting in Canada or some other country. This will result in no net decrease in GHGs. In fact, it would like result in a slight increase represented by the fuel it takes to import the timber products. Second, appraising land value is hardly an exact science. Anyone aware of the mortgage meltdown should be aware that appraisals can be manipulated, fabricated, and, essentially, purchased by a self-interested party. Having a “qualified” appraiser, as required by the Protocol, hardly addresses this problem. (4) Urban Forest Projects a. Tree Planting and Maintenance: The proposed Urban Forest Protocol would grant GHG offsets for tree-planting and maintenance programs carried out by municipalities, educational institutions, and utilities. This Protocol is the most benign, and probably the most well-intentioned, of the proposed offset protocols. However, even the Urban Forest Protocol contains one serious flaw. b. Net Tree Gain: The Urban Forest Protocol assumes that any “Net Tree Gain” represents an additional reduction in GHGs. While any Net Tree Gain is a happy thing for the environment, people, and the livability of our communities, these gains do occur in the course of business-as-usual. A case in point is the urban forest project carried out by San Francisco’s Department of the Environment. In its September 2009 Annual Report to the Mayor and Board of Supervisors, San Francisco’s Urban Forestry Council noted that a five-year plan, initiated in 2004, had resulted in the planting and maintenance of 26,408 trees. This occurred well before the incentives of GHG offsets. See Annual Report, September 2009, http://www.sfenvironment.org/downloads/library/sfe_urban_forest_annual_report_2009.pdf. c. Emissions Above the Cap: Ultimately, for an offset protocol to have integrity, the results of all offset projects must be the result of the financial incentive. It this is not the case, the financial gain for the “would-have-happened-anyway” project is merely a gratuitous reward. While cities and other institutions would appreciate the extra revenue for planting and maintaining trees they would have planted and maintained anyway, the problem is that all non-additional GHG offset will inexcusably undercut the goal of the associated environmental program, reducing emissions. Any such non-additional offsets, will result in allowing additional unjustified emissions above the cap in the capped sectors. CONCLUSION It is critically important for ARB to resist the temptation to make offsets part of California’s cap-and-trade program. Given that rapid transition to cleaner energy and energy efficiency is critical to avoiding global climate disruption, California cannot afford to endorse a program that would allow increases in emissions in the capped sector above the cap to be “offset” by unverifiable reductions that overlap with business-as-usual. A system that allows such offsets will encourage other jurisdictions to follow suit and create a system that locks in climate degradation and the attendant harsh consequences. While these offset protocols are supported by interests that would like to profit from the protocols and by continued emissions in the capped sectors, they would create a huge loophole of non-additional offsets and would delay effective action in ways that are likely to be tragic for today’s young people and for future generations. While we agree that it would be positive for California to create incentives for a net increase in additional forest cover, more reliable capture and destruction or recycling of ozone depleting substances, and reductions in livestock methane emissions, we do not believe that GHG offsets are a reliable way to accomplish these goals. As demonstrated above, the proposed offset protocols are an inappropriate mechanism for seeking these improvements because it there are numerous barriers to reliably verifying that any given project is additional. As a result, it is arbitrary and capricious and inappropriate for the Air Resources Board to approve the proposed GHG offset protocols. |
Attachment | www.arb.ca.gov/lists/capandtrade10/878-comments_on_proposed_ab_32_offset_protocols_12-13-10v7.doc |
Original File Name | Comments on Proposed AB 32 Offset Protocols 12-13-10v7.doc |
Date and Time Comment Was Submitted | 2010-12-13 17:12:11 |
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