A Voluntary Federal Framework
Establishing a nationwide system for carbon reporting and an offset exchange will empower states, municipalities, and businesses to decrease emissions while increasing investment in clean energy and improving transparency and accountability
States and local governments have established their own policies to shift toward clean energy for over a decade, and the private sector is providing customers with more clean energy solutions in every part of the economy each new year. Hybrid cars are commonplace, electric vehicles are on the rise, homes and businesses are more energy efficient than ever, and utilities across America are providing renewable power on demand to corporate and residential customers.
As a result, U.S. greenhouse gas emissions have fallen to their lowest levels since 1991, and powersector emissions are 28 percent below their 2005 peak. Thousands of companies and municipalities now calculate their emissions and have taken measurable steps to reduce their carbon footprint. Green
bonds — financial tools often used to reduce greenhouse gas emissions — attracted over $150 billion of investment last year, double what it was the year before.
While these are encouraging signs, there is opportunity to harness these decisions in a more comprehensive way. Currently, these actions are not reported to a single system where they can be aggregated, and their collective impact better understood and optimized. Beyond making reductions on their own, many businesses pay someone else to reduce, avoid, or sequester carbon because it’s cost effective. In the United States alone, a $28 billion a year offset credit market has grown to meet this demand.
Instead of superseding these actions and actors, federal policymakers should build on the achievements of states and momentum inside the private sector by creating a voluntary reporting and offset exchange system that empowers additional actors and actions. A voluntary greenhouse gas emissions registry and standards for carbon offsets will mainstream emissions reductions efforts and increase capital investment in clean energy.
The pressure faced by Congress to address climate change — especially from millennials — and the Trump administration’s simultaneous proposals to replace the Clean Power Plan call for pragmatic policy solutions. Focusing on reporting and offset exchanges is consistent with the market-based mechanisms that states have been using to reduce greenhouse gases for over a decade. Currently, 10 states use compliance driven cap-and-trade markets; it’s expected that 12 will do so within the next year.
Carbon capture and storage offsets may be a particularly important approach for CPP replacement rulemaking. It is more cost effective than ever since Congress established “45Q” tax credits for this type of voluntary offset early in 2018. However, there must be systems for accounting and transferability to assure American taxpayers of the value and longevity of this approach.
While a voluntary federal reporting and offset accountability system will not satisfy the proponents of firm-handed federal caps and mandates, it is the most politically viable approach to supporting states’ rights and local action and guiding the invisible hand of free markets to further drive down emissions and mitigate climate change.