California carbon offsets registered
This week the California Air Resources Board (ARB) announced that it will be issuing the first carbon offsets for use in the state’s compliance market.
Carbon offsets are a valuable part of a successful carbon market, since they provide regulated businesses with a second option to purchase to account for their annual emissions.
ARB’s first issuance totals 600,000 carbon offsets that were generated from Ozone Depleting Substance (ODS) projects, which involve destroying refrigerant gases before they leak into the atmosphere, where their harmful effects impact our climate.
Each carbon offsets represents an emission reduction of one metric ton.
Beginning in January of this year, large industrial businesses in California were required to begin monitoring their emissions.
To achieve the state’s goal of reducing emissions by 20% by 2020, these businesses must purchase either carbon allowances or carbon offsets to account for every ton of carbon dioxide they release.
So far, the ARB has only been able to offer allowances, which have been sold at quarterly auctions.
Almost 160 million allowances have been purchased at the four auctions held to date, generating revenues of over $1 billion that California will use to fund other emission reducing projects in the state, improve air quality in disadvantaged communities, and offset any increases in electric prices.
Carbon offsets act as a cost containment mechanism to ensure that allowance prices don’t reach levels that would be detrimental to businesses in the state.
The ARB has approved only a few carbon offset project types for use in the California market – Forestry, ODS, and Agriculture Methane Capture.
Forest carbon projects are expected to provide the bulk of carbon offsets to the state’s compliance market, since woodlands store millions of tons of carbon.
However, there have not been many projects listed with the ARB, and a shortage in supply is expected.
One analysis conducted by the American Carbon Registry predicts that carbon offsets could fall short of demand by as much as 67% in 2020, if businesses opt to purchase the allowed maximum of 8% of their total emissions.