Comment Log Display

AB 32 Offsets Challenge – Public Comments on Early Action Offsets &
Other Proposed Offset Regulations - October 19, 2011 

Laurie Williams and Allan Zabel, as individuals and as volunteers
for Citizens Climate Lobby

Summary of Evidence that Proposed Greenhouse Gas Offset Regulations
and Early Action Offsets do not meet the AB 32 Integrity Criteria:

In the proposed “Article 5: California Cap on Greenhouse Gas
Emissions and Market-Based Compliance Mechanisms” (the
“Regulation”), the ARB attempts to go far beyond the authority
given it by the Legislature in enacting AB32.  In addition, through
the Regulation the ARB unlawfully creates vague, subjective and
unenforceable standards that violate the clear integrity criteria
established by AB32 for market-based mechanisms.  The ARB fails to
distinguish and disallow claimed offset projects that would have
occurred without the incentive of the offset program.  Through
allowing offset credits for “Early Action,” the Regulation would
provide offset credits for projects that are already happening
and/or have happened prior to the adoption of the offset protocols.
 Finally, by approving “sector based” offsets for “reduced
deforestation and degradation,” the proposed Regulation creates an
imaginary baseline of degradation and permits offset credits for
achieving less deforestation and degradation than that imaginary
baseline.  Each of these problems means that the offset credit
provisions of the proposed Regulation are ultra vires and contrary
to law because they fail to meet the AB 32 Integrity Criteria
described below.  (We incorporate by reference, all of our prior
comments, including our comments submitted on Dec. 13, 2010, Aug.
10, 2011, and Sept. 27, 2011, October 18, 2011.) 

AB 32 Integrity Criteria:

“(d) Any regulation adopted by the state board pursuant to this
part or Part 5 (commencing with Section 38570) shall ensure all
of the following:
(1) The greenhouse gas emission reductions achieved are real,
permanent, quantifiable, verifiable, and enforceable by the state
board.
(2) For regulations pursuant to Part 5 (commencing with
Section 38570), the reduction is in addition to any greenhouse
gas emission reduction otherwise required by law or regulation,
and any other greenhouse gas emission reduction that otherwise
would occur.

(See AB 32 at Section 38562(d).)

No Legal Basis for Expansion of the ARB’s Authority
The regulatory provisions regarding the creation of offset credits
far exceed the ARB’s statutory mandate.  Fundamentally, under
California law, an agency does not have the discretion to
promulgate an administrative regulation that is not authorized by
or is inconsistent with or enlarges the scope of an act of the
Legislature.  See Sabatasso v. Superior Court, 84 Cal. Rptr. 3d 446
(Cal. App. 4th Dist. 2008), as modified, (Oct. 22, 2008); In re
J.G. 159 Cal.App.4th 1056, 1067, 72 Cal.Rptr.3d 42 (2008); Slocum
v. State Bd. Of Equalization  134 Cal.App.4th 969, 974, 36
Cal.Rptr.3d 627 (2005).
Here, under the guise of AB32, the ARB has created a massive new
regulatory scheme regarding the creation of offset credits and
ceded to itself vast discretionary power to determine whether
proposed offset projects would occur in the course of
“business-as-usual.”  The Legislature has clearly limited the ARB’s
legal authority in this area.  AB32 states that any regulation
adopted by the ARB “must ensure” that any claimed GHG reduction “is
in addition to any greenhouse gas emission reduction otherwise
required by law or regulation, and any other greenhouse gas
reduction that otherwise would occur.”  AB32 Section 38562(d)
Under  the ARB’s scheme in the Regulation, “ARB offset credits”
must be “additional.  Regulation section 95802(a)(12).  In order to
be “additional,” reductions underlying offset credits must “exceed
any greenhouse gas reductions or removals that would otherwise
occur in a conservative business-as usual scenario.”  Regulation at
section 95802(a)(3).  A “business-as-usual scenario” is:
[T]he set of conditions reasonably expected to occur within the
offset project boundary in the absence of the financial incentives
provided by offset credits, taking into account all current laws
and regulations, as well as current economic and technological
trends.
Regulation at section 95082(a)(36).  
The Regulation provides no further guidance on how one can
objectively analyze conditions that are “reasonably expected to
occur.”  The Regulation places the chief responsibility for making
this standardless determination on either the offset project
operator, which is the entity responsible for implementing the
offset project, Regulation at § 95082(a)(179), or the operator’s
agent (the “authorized project designee, Regulation at §
95082(a)(22)) and the offset verifier.  Thus, this key, inherently
governmental function has been delegated to private industry.  
Once a request to create an offset credit is submitted to CARB,
CARB must make a decision within 45 days.  Regulation at §
95981(c).  Through this process, then, the public is provided no
opportunity to weigh in on the determination made by the project
developer and the private independent verifier on the determination
of what is “reasonably expected to occur,” compounding the prospect
of erroneous or inconsistent determinations of what may reasonably
be expected to occur.  This unauthorized, behind-closed doors
process regarding this key element of offset creation has no
statutory basis, and therefore does not meet the requirements of
California law.


Evidence of Failure to Meet Integrity Criteria

1.	The Proposed Regulation contains definitions and other
provisions related to the generation and verification of offset
credits that are vague, subjective and unenforceable:

“Additional” means, in the context of offset credits, greenhouse
gas emission reductions or removals that exceed any greenhouse gas
reduction or removals otherwise required by law, regulation or
legally binding mandate, and that exceed any greenhouse gas
reductions or removals that would otherwise occur in a conservative
business-as-usual scenario. (Proposed Reg, at p. A-5.)  
Comment: There is no way to reach an objective (and therefore
verifiable and enforceable) determination concerning what would
constitute a “conservative business-as-usual scenario.”

“Adverse Offset Verification Statement” means an Offset
Verification Statement rendered by a verification body attesting
that the verification body cannot say with reasonable assurance
that the submitted Offset Project Data Report is free of an offset
material misstatement, or that it cannot attest that the Offset
Project Data Report conforms to the requirements of this article or
applicable Compliance Offset Protocol. (Proposed Reg. at p. A-6.) 

Comment: In this definition and in the definition below, the use of
a “reasonable assurance” standard is further confirmation that the
“verification body” is not being provided with an objective
standard against which to compare the project and therefore cannot
make a determination that that the project meets the Integrity
Criteria. 

“Less Intensive Verification” means, for the purposes of this
article, the offset verification services provided in interim years
between full verifications of an Offset Project Data Report; less
intensive verification of an Offset Project Data Report only
requires data checks and document reviews of an Offset Project Data
Report based on the analysis and risk assessment in the most
current sampling plan developed as part of the most recent full
offset verification services. This level of verification may only
be used if the offset verifier can provide findings with a
reasonable level of assurance. (Proposed Reg. at p. A-27.) 
Comment: See prior discussion, above, re: “reasonable assurance.”

 “Project Baseline” means, in the context of a specific offset
project, a conservative estimate of business-as-usual GHG emission
reductions or GHG removal enhancements for the offset project’s GHG
emission sources, GHG sinks, or GHG reservoirs within the offset
project boundary. (Proposed Reg. at pp. A-38-39.) (See prior
discussion re “conservative business as usual scenario.”  
Comment: Here the use of the term “estimate” inserts another
acknowledgement of best guess subjectivity, rather than an
objective, enforceable standard.

“Reasonable Assurance” means a high degree of confidence that
submitted data and statements are valid. (Proposed Reg. at p.
A-41.) 
Comment: See discussion of “reasonable assurance” above.

Establish a project baseline that reflects a conservative estimate
of business-as-usual performance or practices for the offset
project type; (Proposed Reg. at p.  A-197.) 
Comment: See discussion of “conservative estimate of
business-as-usual,” above.

2.	The Inclusion of Early Action Offset Credits under Climate
Action Reserve Protocols and other Programs Violates the Integrity
Standards

	a.  The “Early Action” provisions of the Regulation create a
mechanism to retroactively approve and issue offset credits for
projects which started before, sometime several years before, the
enactment of AB32 and the promulgation of offset protocols. 
Examples of these provisions include:

“Early Action Offset Credit” means a tradable credit issued by an
Early Action Offset Program that represents a GHG reduction or GHG
removal enhancement equivalent to one metric ton of CO2e and meets
the requirements of section 95990(c). (Proposed Regulation at
A-17.)

Early Action Offset Project Commencement Date. Offset projects that
transition to Compliance Offset Protocols pursuant to section
95990(k) may have an Offset Project Commencement date before
December 31, 2006. (Proposed Regulation at A-200.)

Comment: The definitions and rules in the Early Action Offset
Credits section allows offset credits from programs that have been
ongoing, in some cases as early as 2001.  Alleged emissions
reductions that occurred between 2001 and 2004, are eligible to be
part of a forest buffer account.  In addition, offset credits can
be provided for alleged emission reductions that occurred between
January 1, 2005 and December 31, 2014.  The grandfathering of such
“reductions” is contrary to the requirement that reductions must be
beyond what would have occurred absent the implementation of AB 32.
The early action programs are ongoing programs in the voluntary
offset market and, by definition, are not “additional” as a result
of the offset program created by the proposed Regulation.

	b.  The scheme for approving “Early Action” offsets lacks any
mechanisms for attempting to assure that these projects meet the
integrity criteria of AB32.  The most blatant truncation of a
necessary review process is the following:

§ 95990. Recognition of Early Action Offset Credits: Approval of
Early Action Offset Programs. To qualify as an Early Action Offset
Program, either the Executive Officer shall issue an Executive
Order pursuant to section 95986(k) or the program must demonstrate
to ARB that it (among other criteria). . . occurred between January
1, 2005, and December 31, 2014.

Comment: The process of approval of Early Action Offset Credits
allows the Executive Officer to approve such offsets with no public
notice or transparency and without making any required findings
regarding AB 32’s Integrity Criteria.


3.	Potential Future Approval of Reduced Emissions from
Deforestation and Forest Degradation (REDD):

By including offset credits for REDD, the proposed Regulation
provides a future road map for project developers to create an
imaginary baseline of degradation and then permits such projects to
create offset credits for achieving less deforestation and
degradation than that imaginary baseline.  This allows California
to participate in a program that allows for ongoing degradation,
while calling it “additional” emissions reductions.  

4.	Conclusion:  
The offset credit provisions of the proposed Regulation, and the
four Offset Protocols incorporated by reference therein (see
proposed Regulation incorporated by provisions found at p. A-199,
Livestock, ODS, Urban Forest and U.S. Forest Protocols), fail to
meet the AB 32 Integrity Criteria and should be removed.  All
provisions of any revised version of the Regulation must comply
with the AB 32’s Integrity Criteria (see AB 32 Section 38562(d)).