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 Allowances | Price Collar | Targets and Timetables | Offsets
Offsets
A smart climate policy should allow the widespread and robust use of domestic and international offsets by electric companies. The term “offsets” refers to external and other efforts by anyone (a person, a company, a government, etc.) to reduce, avoid, or sequester GHG emissions in order to “offset” or neutralize their own emissions.
In a cap-and-trade system, an offsets program allows regulated entities to meet a certain percentage of their compliance obligation with allowances generated through offsets projects. There are many different types of offsets programs, including “off-system” activities, such as energy-efficiency programs, and “non-generation” on-system initiatives, such as electric companies improving the efficiency of their transmission and distribution lines.
In the early years of a cap-and-trade program, offsets will be one of the few tools that electric companies will have for meeting GHG emissions reduction targets. Offsets should be subject to monitoring, measurement, appropriate third-party verification, and regulatory oversight. Yet, climate legislation should not limit the types, quantity, or geographic location of offsets that companies are able to use to meet a GHG mandate. This flexibility is critical for electric companies to help reduce price increases for consumers.
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