In a recent decision by a California Appeals court, the appellant, (Our Children’s Earth Foundation; (Appellant)), challenged the State Air Resources Board’s (Board) use of carbon offsets within its Cap-and-Trade program and more specifically, its method for establishing that the offsets achieve the requirement of “additionality.” That’s a loaded sentence so let’s start from the top.
In a sophisticated Cap-and-Trade system like California’s, regulated entities are given a number of options for meeting emission reductions targets. Offsets are one such option. Instead of undertaking on-site emission reduction projects within the emissions cap, emitters may choose to purchase emissions reduction credits generated by projects undertaken outside of the emissions cap. The design of such policy works because emissions—regardless of whether they are released by a coal-fired power plant in Ohio or through the cutting of timber in Indonesia—all enter the same global atmosphere. Therefore, a reduction of emissions made by a wind turbine in Maine can be equivalent in global climate impact to emission reductions made by a solar array in Arizona. Because of this, a power plant in California could chose to purchase emissions reduction credits from an afforestation project in Massachusetts, while maintaining the integrity of the emissions cap based in its home state. But the catch is that the carbon reduction represented by each offset credit must have integrity. And that’s the heart of this suit.