Market Price Just Collapsed – Price Less Than 0.5% Of True Social Cost Of Carbon
Scientific Reports Document Major Flaws
Murphy DEP Urged To Not Go There
The Biden Administration just issued policy guidelines to promote voluntary carbon market trading schemes, see:
[Red Flags:
- Land management agencies are making significant investments in improved soils, grassland, and forest data at home and abroad that will reduce measurement uncertainty and support the integrity of VCMs.
- Expanding market opportunities for credible credit providers is an important component of the United States’ climate strategy. Addressing the barriers (e.g., high transaction costs) facing credit generating suppliers—including farmers, ranchers, forest owners, small businesses, developing country jurisdictions, and others—can improve the overall ability of VCMs to produce high integrity credits that advance decarbonization and generate economic opportunity.
The ill-timed and ill-conceived move comes in the wake of several scientific reports that found major flaws with the current voluntary market program and the collapse of the price in 2023.
Even the pro-Biden and pro-market Neoliberal NY Times reported that today:
Yet a growing number of studies and reports have found that many carbon offsets simply don’t work. Some offsets help fund wind or solar projects that likely would have been built anyway. And it’s often extremely difficult to measure the effectiveness of offsets intended to protect forests.
I’ve long been an opponent of all forms of market based pollution trading schemes.
Recall this 2001 Trenton press conference (I did the analysis and presented it as NJ Sierra Club Policy Director). (from the Bergen Record)
EMISSIONS TRADING PROGRAM CRITICIZED AS BOON TO POLLUTERS
By ALEX NUSSBAUM, Staff Writer
Date: 02-15-2001, ThursdayThe state’s industries may be taking advantage of a law that allows them to buy or sell the right to pollute, environmentalists said Wednesday.
The five-year-old system that allows companies to trade air pollution credits has loopholes that make it impossible to tell if factories or power plants are really reducing emissions, critics said at a Trenton news conference.
That work led directly to – and I can take credit for killing the Whitman Administration’s voluntary “Open Market Emissions Trading” (OMET) program.
For an in depth blow by blow analysis of that, see:
the main problem with market-based systems concerned the big picture of emissions trading and its relation to existing policy — the fundamental change of approach to regulating air pollution. Federal officials were concerned with the transition from a regulatory style rooted in command-and-control thinking to one further complicated by a new incentive framework and whether or not it could be administered effectively. […]
The proposed federal [OMET] rule also stipulated that any state seeking to incorporate OMT programs had to comply with federal guidance for all EIPs and this stipulation required incentive programs to be “designed to benefit both the environment and the regulated entity” (EPA, 1995). The OMET program clearly violated this condition. New Jersey’s own SIP submission clearly stated “no VOC or NOx emissions reductions were projected to be associated with the implementation of the NJ OMET program” (Wolfe, 2001). […]
The public comment period required by the conditional approval prompted joint written comments from the New Jersey Chapter of the Sierra Club and PEER to EPA’s IG.
Those formal written comments itemized the two group’s concerns regarding EPA’s proposed approval despite “numerous cautionary findings by the Inspector General that such programs may be deeply flawed and would pose a hazard to public health.” In addition, the groups collectively claimed that facilities “used this never-approved program both to generate credits and use them to demonstrate ‘compliance’ with the Clean Air Act’s requirements” (Ruch and Wolfe, 2001).
The IG responded to the concerns of PEER and New Jersey’s Sierra Club by initiating an investigation in 2001 that focused on the emissions trading programs launched in New Jersey and Michigan.
(Source: Ruch, J. and Wolfe, B. (2001). Letter to Nikki Tinsley, Office of Inspector General, US Environmental Protection Agency. Public Employees for Environmental Responsibility, Washington, DC and New Jersey Chapter of the Sierra Club, Princeton, NJ).
More recently, just 3 weeks ago I wrote to get the word out that the Murphy DEP was developing a carbon trading program for NJ, including for forest management, see:
So, given the Biden Administration’s new push (and likely funding for), there is likely to be additional pressure on DEP to move forward with an expanded carbon trading scheme (beyond the RGGI cap and trade program, which provides several million dollars for carbon sequestration in forests).
To try to nip this in the bud, I sent another warning letter to legislative and Murphy DEP policymakers and environmental and climate activists:
———- Original Message ———-
From: Bill WOLFE <b>
To: “shawn.latourette@dep.nj.gov” <shawn.latourette@dep.nj.gov>, “john.cecil@dep.nj.gov” <john.cecil@dep.nj.gov>, senbsmith <SenBSmith@njleg.org>, sengreenstein <sengreenstein@njleg.org>, “senmckeon@njleg.org” <senmckeon@njleg.org>, “asmScharfenberger@njleg.org” <asmScharfenberger@njleg.org>
Cc: “jonhurdle@gmail.com” <jonhurdle@gmail.com>, “ferencem@njspotlightnews.org” <ferencem@njspotlightnews.org>, “wparry@ap.org” <wparry@ap.org>, “fkummer@inquirer.com” <fkummer@inquirer.com>, “O’Neill, James” <ONeillJ@northjersey.com>
Date: 05/28/2024 8:28 AM EDT
Subject: Biden – Forestry carbon markets
Friends – The Biden administration just issued policy guidance on voluntary carbon market trading, see today’s NY Times story which was surprisingly critical:
Carbon Offsets, a Much-Criticized Climate Tool, Get Federal Guidelines
https://www.nytimes.com/2024/05/28/climate/yellen-carbon-offset-market.html
I’ve previously criticized carbon markets, most recently in response to the Murphy DEP’s development of a offset/trading program, particularly for forest management, see:
Scientists Report: Market Based Carbon Trading Scheme Fails To Protect Forests Or Reduce Poverty
So, I thought I’d share this additional relevant scientific study, which found:
“Our analysis identifies important areas where the protocols deviate from scientific understanding related to baselines, leakage, risk of reversal, and the accounting of carbon in forests and harvested wood products, risking significant over-estimation of carbon offset credits.”
Comprehensive review of carbon quantification by improved forest management offset protocol
https://www.frontiersin.org/articles/10.3389/ffgc.2023.958879/full
Those flaws possibly explain why the market has collapsed: (see attached graph)
I urge NJ policymakers in the Legislature and at DEP to just say no to trading and offset programs, particularly for forest management.
Any market based incentives should be based on the EPA Social Cost of Carbon (with the most conservative assumptions) and implemented via regulations.
Wolfe