The approval of the Early Action Offset Program and the approval of the Early Action Offset Credits are two separate and distinct processes within the California carbon offset scheme.



The California carbon offsets program provided for by the cap-and-trade regulation contains the separate part regarding so-called ‘Early Action Offsets.’


Regulation includes a process and criteria for accepting ‘early action’ offsets from qualified existing offset projects, which, basically, were earlier carried out on the basis of previous versions of protocols adopted by ARB for four project types.

In short, the effect is that after transition, project begins new crediting period.


Some voluntary offset projects that have been issued offset credits by approved voluntary registries for GHG reductions or removal enhancements that occurred between January 1, 2005 and December 31, 2014 may be eligible to be issued ARB offset credits.  These projects are referred to as early action offset projects.  Early action offset projects must meet specific requirements in the Cap-and-Trade Regulation.


The first step in the process is to list the early action offset project with ARB.  Once the listing information for an early action offset project has been submitted ARB will review it and the offset project will be listed.  The listing information provides general information about the early action offset project.

In order for the early action offset credits to be eligible to become ARB offset credits, after listing they must undergo regulatory verification which includes an assessment of conflict of interest and a desk review to confirm the validity of the initial verification.  Upon satisfying the requirements in section 95990(c) of the Regulation, and successfully completing the regulatory verification process, applicants may request the issuance of ARB offset credits.


After the request has been made, ARB will conduct a full review of all project documents.


If the review shows conformance with the Regulation, ARB offset credits will be issued.


After issuance, information regarding the early action offset project, including number of ARB offset credits issued by vintage, and invalidation status will be made publicly available.


To qualify as Early Action Offset project must cover vintages of reductions that took place between 1 January 2005 and 31 December 2014, located only in the United States.


The key requirement is that projects must be registered with Early Action Program by January 1, 2014. It goes without saying that only project types for which ARB adopted a compliance offset protocol are eligible.


In the judgment of the California environmental regulators recognizing existing offset projects supports the requirements of the California climate legislation (in particular AB 32) to ensure that voluntary reductions receive appropriate credit, however, Early Action Offset Programs were heavily questioned by different lobbies emphasising the environmental integrity criteria.

In this context it is noteworthy that the questions that are often confused are the regulatory approvals of:

1) the Early Action Offset Program, and

2) the Early Action Offset Credits.


It needs to be stressed that taking into account the language of the California cap-and-trade regulation the approval of the Early Action Offset Program and the approval of the Early Action Offset Credits are two separate and distinct processes within the carbon offset scheme.


While an executive order can be issued to approve an Early Action Offset Program, one may not be issued to approve any Early Action Offset Credits.


Furthermore, cap-and-trade regulation lays out all the requirements that reductions achieved as early action offset credits must meet before they can be eligible for compliance.

These include the following requirements:


1. The emission reductions must meet all of the criteria specified in section 95990(c) of the California cap-and-trade regulation, including that the reductions must occur between January 1, 2005, and December 31, 2014, after which all projects must transition to ARB Compliance Offset Protocols;


2. As specified in sections 95990(d), (e), and (h) of the California cap-and-trade regulation, those seeking compliance offsets must register and submit attestations to ARB. In addition, the Early Action Offset projects must be listed on a publicly available website to ensure transparency;


3. The emission reductions must meet all the requirements for regulatory verification as specified in section 95990(f) of the California cap-and-trade regulation. The requirements for regulatory verification must be met to ensure that the early action offset credits meet the requirements in AB 32 that all offsets must undergo regulatory verification. All emission reductions achieved by early action offset projects must be verified by an ARB accredited third-party verifier, and the verifier must be different than the one that performed the original verification under the Early Action Offset Program. This ensures that all offset credits allowed in the program meet the same verification requirements and ensures that the offset project be subject to an independent review that is completely unbiased;


4. Conflict-of-interest requirements, as specified in section 95990(g) of the California cap-and-trade regulation, that ensure that the verification body does not have a conflict of interest with the project operator or the largest holders of the Early Action Offset Credits;


5. Issuance requirements that require ARB to review and make a determination based on all the above criteria, including an independent ARB accredited third-party verifier review, whether the early action offset credit meets the requirements of the regulation and can be used for compliance. If ARB determines that the Early Action Offset Credit meets the requirements of section 95990 of the California cap-and-trade regulation, it will require that the Early Action Offset Program provide proof of permanent retirement of the early action offset credits in its system, and ARB will then issue ARB offset credits for the reductions.


In conclusion, taking into account the economics of the California carbon scheme, Early Action Offset Credits play an important role in balancing the market, particularly in its early stages.


It seems that any regulatory disturbances in the influx of Early Action Offset Credits into the market will have a strong impact on market trends and strategies. From that point of view, the issue is worth of being closely monitored by the relevant departments of carbon market players.