Do credits issued between 2001 and 2004 qualify as ‘Early Action Offset Credits’ under the California cap-and-trade?



In general, offsets currently approved in the California cap-and-trade program may only result from GHG reductions or sequestration in the United States. Offsets from other countries and offsets developed under the Clean Development Mechanism (CDM) have not  so far been approved under the California scheme.


California offsets program is designed very differently than the CDM, relying on standardized assessments of additionality established by the California Air Resources Board (ARB) through a public process and not relying on project-specific assessments done by the project developers themselves.


Interesting feature of the California program is the retroactive force of the offset rules known as the “Early Action Offset Credits.” The “Early Action” provisions of the scheme create a mechanism to retroactively approve and issue offset credits for projects which started before, sometime several years before, the enactment of AB 32 and the promulgation of offset protocols.


As regards Early Action Offset Credits among the requirements imposed is the one that the program must demonstrate to ARB that it occurred between January 1, 2005, and December 31, 2014.


However, with respect to the definitions of “Early Action Offset Credit” and the “Early Action Offset Project Commencement Date” and particularly to credits issued between 2001 and 2004 some ambiguities have arisen.


Sometimes it is said that the scheme allows offset credits from programs that have been ongoing, in some cases as early as 2001 and that alleged emissions reductions that occurred between 2001 and 2004, are eligible to be part of a forest buffer account.


In this place it needs to be clarified that Sections 95990(i)(1)(D)(1)(a) and (b) of the California cap-and-trade Regulation stipulate that the credits with vintages from 2001 through 2004 that are released to ARB by the Early Action Offset Program may only be retired by ARB in the event of a reversal. The said provisions further clearly state that these vintages may not be used to satisfy ARB’s Forest Buffer Account requirements under provisions on the recognition of Early Action Offset Credits.


Regulatory motives seem to indicate that this provision was included because credits with vintages from 2001 through 2004 will still be considered voluntary credits, and not compliance offsets. The vintages at issue classified as voluntary credits mustn’t be allowed to be used for compliance purposes. However, retaining these credits in the Forest Buffer Account will ensure that in the event of a reversal the atmosphere is made whole by retiring all voluntary and compliance offsets issued to the project.


It follows from the above that the potential statement that credits issued between 2001 and 2004 are eligible to be part of the forest buffer account is incorrect, and the California emission trading scheme only allows for emissions reductions beginning in 2005 to qualify as Early Action.