photo: Todd Woody
With the U.S. House of Representatives set to vote on the Waxman-Markey climate change bill this week, a report issued Thursday predicts the American Clean Energy and Security Act will create a huge market in carbon offset projects like reforestation.
In its current form, the legislation allows companies to comply with a cap on greenhouse gas emissions in part by purchasing carbon offset credits generated by domestic and international projects that reduce CO2 — such as capturing methane gas leaking from landfills. According to an analysis by research firm New Energy Finance, demand — for up to 5.7 billion tons of offsets — will far outstrip supply, with domestic projects contributing fewer than 30% of the offsets.
“Waxman-Markey will induce cumulative production…of offsets until 2020 to satisfy demand for reductions,” wrote the report’s authors. “We estimate that Waxman-Markey’s targets and lenient offset limits will create high levels of offset project development – both domestic and international.”
In other words, U.S. climate change legislation could goose a global market for offsets. In the U.S. alone, New Energy Finance estimates that the offset market will grow 27-fold by 2015, becoming a $46.7 billion business by 2020.
Some environmentalists have slammed Waxman-Markey for its generous use of offsets, arguing that U.S. companies could actually increase their carbon pollution while meeting the cap by buying other people’s emissions reductions. Relying on overseas projects to supply the majority of offsets also raises questions about how those efforts will be verified and overseen, especially if a carbon boom develops.
On the plus side, New Energy Finance expects tree projects to “play a pivotal role” in the offset market, which could slow the rapid rate of deforestation afflicting the planet.