Climate change : observations on the potential role of carbon offsets in climate change legislation

PDFResearch PaperGAO-09-456TEmissions tradingClimate changeLegislationUnited States. Government Accountability OfficeStephenson, JohnNTL-ENERGY AND ENVIRONMENT-Air QualityNTL-ENERGY AND ENVIRONMENT-Environment ImpactsNTL-ENERGY AND ENVIRONMENT-ENERGY AND ENVIRONMENTNTL-PLANNING AND POLICY-Plans and Policy StatementsUS Transportation CollectionCurrently, carbon offsets are generated, bought, and sold in two types of markets. In markets such as the United States, which does not have binding limits on emissions, the market is referred to as a voluntary market. Conversely, in the European Union\u2019s Emissions Trading Scheme (EU ETS), a program to limit emissions of carbon dioxide from certain industry sectors, the market is referred to as a compliance market because regulated entities can use a limited number of carbon offsets to meet their regulatory limits on emissions. Under the EU ETS, regulated entities use offsets generated through the Clean Development Mechanism (CDM), a program under the Kyoto Protocol that allows countries with binding limits on emissions to implement projects that reduce or avoid emissions in a developing country that does not have a binding target under the Protocol. CDM projects earn credits, each equivalent to 1 metric ton of carbon dioxide that an industrialized country sponsoring the project can sell or use for compliance with targets under the Protocol. These credits are known as Certified Emissions Reductions (CERs). The United States has not ratified the Kyoto Protocol and is therefore not a source or purchaser of CERs