Which existing offsets registries in the United States would work best with the goals of the climate and energy bill introduced by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.), which made its way through the House Energy and Commerce Committee last week? During today's OnPoint, Gary Gero, president of the Climate Action Reserve, an offsets registry for the U.S. carbon market, explains the role his organization could play if the Waxman-Markey bill is enacted. He discusses the Climate Action Reserve's process for ensuring the quality of its offsets and talks about linking Mexico and Canada's markets with the United States'.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Gary Gero, president of the Climate Action Reserve and offsets registry for the U.S. carbon market. Gary, thanks for joining me today.
Gary Gero: Thank you for inviting me.
Monica Trauzzi: Gary, there have been a series of external analyses done of offsets registries in the U.S. that focus on which organizations may be most likely to play a role in a cap and trade once it's established in the US. And a recent study by WRI found that the climate action reserve would fit in well with the goals of the Waxman-Markey bill which is currently making its way through the house. What role do you see the Climate Action Reserve playing in the U.S. as a cap and trade is established and moving forward?
Gary Gero: Sure, and we're pleased to see that legislation is moving forward. I think it's important that this country move forward on the basis of addressing serious climate change issues. We've designed the program from the start as a regulatory quality program. Now, we recognize that only a regulator ultimately to make the decision as to what is regulatory quality or not. But our goal in mind when we launched the climate action reserve as an offsets registry was to mimic how a government agency would design, implement, and operate an offsets program. So we engaged the public very broadly in how we set our standards. All of our information is publicly available. We provide notice and comment periods so that we can absolutely ensure that there's full transparency to the work that we do. And then our web site itself, anyone can dig into the details of a project. With that said, having designed a program to that degree of quality, we think that there is a role for us in a future cap and trade and a couple of places where we would see that. Certainly, and this is the fundamental promise of the original work of the California Climate Action Registry from which the Climate Action Reserve has sprung is to incentivize and reward early voluntary action. We absolutely believe that people need to start taking actions today to reduce greenhouse gas emissions, but people need to be assured that if they do take those actions that they would be recognized under future regulatory regimes. Given that, we've designed a program that we think provides certainty to the regulators that the emission reductions associated with these activities today are real and should be counted against a future cap and trade. Beyond that, I think it's important to note that a lot of what we've designed, we're writing national standards for how projects should be quantified and I think those national standards can form the foundation for a future national program.
Monica Trauzzi: And how does your group ensure the quality of your offsets, because that's one of the big concerns and one of the big discussions that we're hearing about, what steps do you take to verify those offsets?
Gary Gero: A couple of things that we do to make sure that the offsets are real. Certainly that's got to be the fundamental principle of any program and it's certainly the principle of our program. We are, at the end of the day, an environmental nonprofit and we're engaged in this activity so that when there are claims made about a ton of emission reductions we say we can stand behind them and say that's a real reduction. It's essentially like an organic seal of approval for an offset. So, first it starts with strong standards. Any offset has to be defined by a series of tests that ensure that it meets those tests of being real and permanent and verifiable and additional and enforceable. And we do that in a broad consensus based process. I talked about engaging the public. We don't write these rules in our cubicles back in our offices. We actually hold stakeholder meetings, workgroup sessions, and write standards in a broad consensus based process to. Those standards are the highest quality, but standards are only as good as they can be verified and enforced. And that's where we have a particularly robust program. Again, coming from the legacy of the California climate action Registry where we learned how to train and accredit and oversee independent third-party verifiers. When we write a project protocol we write a concomitant verification protocol that's very prescriptive. It tells the verifier this is what you go out and look for in the field. These are the data measurements that are required. Here's the calibration for the meters. All of that goes to ensuring that the verifier knows what they're supposed to be doing and actually knows how to do it. So we provide that accreditation. And then we oversee them, so we'll actually review the verification reports when they come in, make sure that they're accurate, that there aren't any material misstatements, that it does reflect the real reductions. And the last piece, even after verified, I think it's very important to ensure that these emission reductions are not double counted. And to do that we have legal documentation around title. We create a unique serial number for each and every single ton of reductions and track the transaction of those tons over time and when they're retired they're permanently locked away. Nobody can ever count them again or sell them again.
Monica Trauzzi: If your group was given an official role in verifying offsets, how would you meet that large demand? I mean what are you doing now to sort of groom your organization to be able to handle the demands of the U.S.?
Gary Gero: Sure, clearly, the scale of what we're talking about in a federal cap and trade is much larger than what we have today in our voluntary program. But everything that we've designed and built that we've done around the idea of it being scalable. And so when we looked at the area of offsets originally back in 2004 there were two fundamental different approaches. One was a project by project specific analysis approach that's used under the Kyoto Protocol, under the Clean Development Mechanism, which we thought probably wasn't scalable because it's administratively difficult to implement and so we chose a path of performance based standardized protocols. That makes the administrative processing of projects much simpler and you can handle a lot larger volume of projects, simply getting them through the system. And we guarantee a turnaround today of about two weeks when we get a project submitted to us because the standards are so clear. The second thing we're doing and it goes to the verification, is we're working with the American National Standards Institute to help us train and accredit verifiers. So there are sufficient numbers of verification bodies out there that can actually do this work. And then the registration and tracking system is absolutely scalable. We're based on a platform that is used in the REX market today that is seeing a billion transactions and hasn't had a problem. So, I think everything we've designed could be viewed as a pilot for scaling up on a federal scale. But it is all designed so that it could be scaled.
Monica Trauzzi: And final question here, how do you see the offsets market working in the U.S. once legislation is passed, whenever that might be? Is it going to be a series of interconnected registries? Is there going to be one overarching registry? How do you see that working?
Gary Gero: My sense is that the best solution is to have a single registry, a single set of standards that everyone knows what the rules are and who the players are so that you can't game a system. You can't go from registry to registry trying to figure out where you're going to get the best deal. You certainly don't want registry shopping and protocol shopping, standards shopping. So I think that ultimately it will have to be a single nationally administered program with a single set of national standards for how to quantify the emission reductions that result from these projects. The verification could be bifurcated or more if necessary, but I think that the standards and the registry absolutely have to be unitary in order to prevent that sort of manipulation might occur.
Monica Trauzzi: Okay, we'll end it right there. Thank you for coming on the show.
Gary Gero: Absolutely.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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