The compliance market for offsets proposed under the House’s American Clean Energy and Security Act would not just mean more opportunity for companies already in the business of selling carbon offsets. It would also result in a major realignment in the types of offsets offered, shifting away from renewable energy to offsets derived largely from land use, land use change, and forestry projects (otherwise referred to by the clunky acronym LULUCF).
That’s because Waxman-Markey, as the House bill is known, excludes all forms of energy production, including renewable sources, from the huge carbon offset program it would create.
“Since fossil fuels used to make electricity are capped, there is an automatic ‘credit’ from purchasing renewable energy due to the need to hold fewer allowances,” said David Hawkins, director of the Natural Resource Defense Council’s climate center. “Creating an offset credit for those renewable kilowatt hours would be double counting.”
Aside from the carbon price, which would help to level the playing field for clean energy, as Hawkins noted, other mechanisms will also drive renewable energy development, including the renewable electricity standard, which specifies that the United States should get 20 percent of its electricity from renewable sources or energy efficiency by 2020; CAFE standards that regulate auto emissions; and already-approved federal stimulus money for research and development.
But the prospect of agricultural and forestry offsets presented an irresistible opportunity for Big Ag, and just days before the House passed Waxman-Markey on June 26, the House Agriculture Committee, led by Rep. Collin Peterson (D-Minn.) and supported by Agriculture Secretary Tom Vilsack, won some key victories for their constituency that critics argue would impede the country’s ability to actually reduce greenhouse gas emissions.
One of the reasons corn ethanol and, to a lesser extent, soy biodiesel, have fallen out of favor in many circles is because of the international leakage issue. When American farmland is turned over to growing crops for biofuel production, that reduces food availability on the international market, pushing prices higher. People in developing countries can’t afford corn and soy at these prices, so they cut down rainforests to increase local supplies. When the resulting loss of carbon sequestration from deforestation is calculated, biofuels typically do not show a net reduction in CO2 emissions over fossil fuels.
Many people in agriculture regard biofuels as an economic godsend that can help save struggling farms (witness the huge boom in biofuel production in the first half of this decade as oil prices reached historic highs). And they have been dismayed by carbon accounting reports that have shown their product to have an about equal warming effect as fossil fuels, information that led California to exclude corn ethanol from its renewable energy fuel standard.
Peterson and the House Agriculture Committee won a concession that international leakage won’t be calculated as part of American biofuels’ carbon footprint for five years, making it appear more desirable on paper. At that point, there will be an evaluation, but the USDA will have veto power over any decision to count leakage.
Environmentalists argue that there is no point to growing biofuels if there is no net climate benefit, and increased water consumption and fertilizer runoff associated with these crops could make them an environmental net negative.