PG&E, Wildlife Society Back Foreign Offsets in California

Pacific Gas & Electric Co., Southern California Edison and the Wildlife Conservation Society joined forces today to endorse a plan that would allow California companies to use credits from forestry projects overseas to comply with state emissions limits.

An advisory panel issued recommendations today on how to implement the plan. It would have to be approved by the state air board before power generators, refiners and other industrial polluters could buy and trade credits generated from the foreign forests to cover a share of their emissions in the state.

The proposal to make it easier to comply with California’s cap-and-trade program comes as Democrats, who control the state Senate, push to limit the program to in-state offsets projects. The forestry plan, known by the acronym REDD for Reducing Emissions from Deforestation and Forest Degradation, has been endorsed by California’s two largest power utilities, The Walt Disney Co. (DIS) and the Climate Markets and Investment Association.

The forestry proposal would “send a positive market signal” and advance “one of the most important global climate-change mitigation strategies of our time,” according to a letter sent to state regulators today from the coalition of businesses and environmental groups.

The Environmental Defense Fund, The Nature Conservancy and other environmental groups issued their own statement today in support of the panel’s recommendations.

Shrinking Pool

“Tearing down and burning tropical forests produces more greenhouse gas emissions than all cars, trucks, buses, trains and airplanes on the planet combined,” said Stephan Schwartzman, the Environmental Defense Fund’s director of tropical forest policy in Washington. “California has the opportunity to help turn that around, by taking a significant step to work with these states and jump-start programs that can keep forests standing.”

Companies can already buy and trade credits generated from carbon-cutting projects in the U.S. to cover as much as 8 percent of their emissions under California’s cap-and-trade program, designed to help cut greenhouse-gas pollution to 1990 levels by 2020. They must use a shrinking pool of allowances, issued by the state through auctions and allocations, to account for the rest of their carbon.

Shell Offsets

The international forestry projects would allow companies to achieve emissions cuts “at the lowest possible cost,” Michael Hertel, Southern California Edison’s director of corporate policy in Rosemead, said in an e-mailed statement yesterday.

Senate President Pro Tem Darrell Steinberg, a Democrat from Sacramento, co-authored a bill that would limit the use of credits “to those offsets originating and achieved within the state.” The bill passed the Senate in May with no Republican votes. It is now pending in the Assembly’s Natural Resources Committee.

Royal Dutch Shell Plc (RDSA), which runs the Martinez oil refinery in Northern California, agreed in March to buy 500,000 credits from a forest management project in Michigan.

The move “does nothing” to reduce air pollution in California, Senator Ricardo Lara, a Democrat from Long Beach who wrote the Senate bill, said in a May 25 analysis of the legislation. “It creates no jobs, makes no in-state investment, no results in any new environmental benefits.”

Panel Recommendations

Stanley Young, a spokesman for the state’s air resources board in Sacramento, declined to comment on the bill. The agency will continue to consider new protocols for possible inclusion in the state’s carbon offsets market and expects to issue a report in the fall about the potential for adding REDD offsets to the program, he said.

“Our goal is to help steer California toward a clean-energy economy,” he said. “And to the extent that we can help promote offset projects that deliver environmental benefits both here in California and elsewhere, then that’s a net plus.”

The REDD advisory panel, which includes university professors and climate program directors, made recommendations today on how the state air board can ensure forestry efforts abroad are actually cutting emissions, certify reductions at the jurisdictional level rather than project by project and hear grievances from local communities with concerns about REDD.

The working group, established through a memorandum of understanding signed by the governors of California, Acre, Brazil, and Chiapas, Mexico, in 2010, has spent the last three years collecting comments from hundreds of people at public workshops to develop the 67-page report released today, said Anthony Brunello, the panel’s facilitator.

‘Different Opinions’

“This was like a multi-layered onion that just keeps getting peeled back and is a mess because you get people having different opinions on what the solution is,” Brunello, who is also executive director of the Sacramento-based Green Technology Leadership Group, said by telephone yesterday. “But everybody agrees that almost 20 percent of the world’s greenhouse-gas emissions comes from tropical deforestation and something needs to be done about that.”

Brunello said the working group hasn’t taken a stance on SB 605, adding that other efforts to limit California’s offsets market have failed.

“This is one line in a bill that came from an important author, but at the same time I think it’s very important for people to keep in perspective what offsets were meant to do,” he said.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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