Offset credits are a specific type of tradable compliance instrument under the California GHG emissions tradycyjnie scheme. California Air Resources Board (ARB) annual report published in January 2013 indicates that offset credits represent an emission reduction or emission avoidance outside of the capped sectors (i.e., reductions in sectors not subject to the Cap-and-Trade Regulation). Covered entities can use ARB-issued offset credits to meet up to eight percent of the obligation for each compliance period. For example, if a covered entity has 100,000 metric tons of covered emissions they submit no fewer than 92,000 allowances.
Offset projects are quantified under regulatory protocols that are approved by the Board and must meet the AB 32 offset criteria of being real, additional, quantifiable, permanent, verifiable, and enforceable. ARB has approved offset protocols for four project areas: forestry, urban forestry, livestock digesters, and the destruction of ozone depleting substances. ARB accredits third-party verifiers to independently verify all offset project reports. Third-party verifiers must work through ARB accredited verification bodies and must complete ARB’s training and pass a specialized test.
ARB can also approve voluntary offset registries that meet regulatory criteria to help administer the program. However, ARB does not delegate any of its oversight or enforcement authority to the verifiers or approved registries. ARB does not currently issue or accept offset credits that originate from projects located outside of the United States.
The purpose of carbon offsets is to reduce the costs of compliance with the California cap-and-trade program and encourage investments in sustainable practices throughout the California economy.
The above-mentioned ARB annual report indicates that in 2012 ARB accredited 62 specially trained third-party offset verifiers to serve as partners in evaluating the quality of offset projects submitted for approval. Eleven verification bodies have also been certified.
In addition, ARB has formally approved the American Carbon Registry and the Climate Action Reserve as offset project registries to help evaluate compliance-grade carbon offsets under the Regulation.
ARB also released instructional guidance documents on the Cap-and-Trade Regulation including a section on offsets. ARB prepared this guidance to describe the regulatory requirements in a user-friendly format. Unlike the Regulation itself, this guidance is advisory and does not have the force of law. The offset guidance includes clarifying detail and examples where additional information would help covered entities successfully achieve the GHG emission reductions required.
For some specific issues regarding California offsets see menu on the right hand side.