A Grand Experiment to Rein in Climate Change

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LEGGETT, Calif. -- Braced against a steep slope, Robert Hrubes cinched his measuring tape around the trunk of one tree after another, barking out diameters like an auctioneer announcing bids. "Twelve point two!" "Fourteen point one!"

Mr. Hrubes's task, a far cry from forestry of the past, was to calculate how much carbon could be stored within the tanoak, madrone and redwood trees in that plot. Every year or so, other foresters will return to make sure the trees are still standing and doing their job.

Such audits will be crucial as California embarks on its grand experiment in reining in climate change. On Jan. 1, it will become the first state in the nation to charge industries across the economy for the greenhouse gases they emit. Under the system, known as "cap and trade," the state will set an overall ceiling on those emissions and assign allowable emission amounts for individual polluters. A portion of these so-called allowances will be allocated to utilities, manufacturers and others; the remainder will be auctioned off.

Over time, the number of allowances issued by the state will be reduced, which should force a reduction in emissions.

To obtain the allowances needed to account for their emissions, companies can buy them at auction or on the carbon market. They can secure offset credits, as they are known, either by buying leftover allowances from emitters that have met their targets or by purchasing them from projects that remove carbon dioxide or other greenhouse gases from the atmosphere, like the woods where Mr. Hrubes was working.

Dozens of verifiers from different fields, from chemists to accountants to foresters, will be the first line of defense in making sure the benefits are real.

Mr. Hrubes said his goal in any audit was to ensure that the forest's owner was "being conservative whenever a judgment call has to be made" in calculating greenhouse gas reductions.

The outsize goals of California's new law, known as A.B. 32, are to lower California's emissions to what they were in 1990 by 2020 -- a reduction of roughly 30 percent -- and, more broadly, to show that the system works and can be replicated.

The risks for California are enormous. Opponents and supporters alike worry that the program could hurt the state's fragile economy by driving out refineries, cement makers, glass factories and other businesses. Some are concerned that companies will find a way to outmaneuver the system, causing the state to fall short of its emission reduction targets.

"The worst possible thing to happen is if it fails," said Robert N. Stavins, a Harvard economist.

Just three years ago, California's plan was viewed as a trial run for a national carbon market that one day might tie into existing markets in Europe and elsewhere. President Obama's first budget proposal included a cap-and-trade program to cut national greenhouse gas emissions 14 percent by 2020; the House later passed an energy and climate bill that incorporated such a program.

But in 2010, political forces backed by the biggest emitters, oil and coal companies, blocked the plan in the Senate. In that year's midterm elections, conservative Republicans disavowed their party's role in creating similar programs; they continue to deride it as "cap and tax."

California air regulators are proud of their record in leading the nation to new auto emissions standards in the 1960s and efficiency standards for appliances in the 1970s. And so the pressure is on the state's Air Resources Board to get this right.

At first, only four means of carbon reduction will be approved for offset credits: timber management, the destruction of coolant gases, cuts in methane emissions from livestock waste and tree planting projects in urban areas. Already, developers of offset projects in more than 20 states are preparing to enter the new market, which for now accepts only credits generated in the United States. Some projects send coolant gases to be destroyed at an incinerator in Arkansas; others, tied to dairies in states like Ohio, Virginia and Wisconsin, will capture methane from livestock waste.

Most of these projects already sell offset credits in other markets like the Regional Greenhouse Gas Initiative, a cap-and-trade program covering utilities in the Northeast.

But offsets can be prone to misuse; some have generated significant private profits while producing questionable environmental benefits. The European Union's eight-year-old carbon trading market has been tarnished by fake credits and audits that failed to meet minimum standards. California's offsets have already been challenged in court by environmentalists who argue that offset developers will earn money for actions that they would have taken even if the program did not exist.

"If there is a loss of confidence because there is a sense that people have been cheating and the offsets are not real, that will be a problem," said Kevin Kennedy, an economist with the World Resources Institute in Washington.

That is why there is such a need for qualified verifiers. This summer, four foresters from around the country gathered in a Los Angeles suburb for a $2,900 test-preparation course to master the new system in advance of a required state test.

All had experience in verification in other carbon trading systems -- so much so that they offered their instructors sharp critiques on the 111 pages of rules. One even challenged the algorithms central to the forest benefit calculations.

"If they don't get the equations right, there could be a real problem," said Terese Walters, a forester from Oregon. She is hoping that having California credentials will lead to lucrative opportunities. Ms. Walters and Caitlin Sellers, a forester from Florida in the class, both work for Environmental Services of Jacksonville, Fla., one of the country's largest environmental consulting firms. David Bubser, another student, is a Minnesota forester and a regional manager for the nonprofit Rainforest Alliance.

There are several basic requirements for a forest offset. Credits cannot be granted for preserving trees that were going to be left standing anyway. The change must be long-lasting: trees must be left intact for a century. And owners must hire accredited verifiers to audit their claims.

The offset marketplace is already beginning to hum as companies gear up for California's rollout.

Independent verifiers can make $800 to $1,200 a day, according to Mr. Bubser. Scientific Certification Systems, Mr. Hrubes's employer, which verified 4.2 million tons of carbon offsets around the world last year, added two foresters this summer, for a total of six.

Sacramento's municipal utility recently held a conference call with potential vendors of credits to offset some of the 1.2 million tons of carbon dioxide emitted annually from its gas-fired power plant -- possibly by buying 200,000 credits annually.

Utility officials made it clear during the call that the more measurable and reliable the offset, the more valuable it would be. The administrators of California's program have set a floor price for allowances at $10 per metric ton of emissions during the first auction in November. Once the program gets going, the actual value of allowances will fluctuate as they are traded.

The Redwood Forest Foundation, created to promote sustainable forestry but also to keep timber jobs in Mendocino County, is considering selling offset credits. Its biggest asset is the 50,000-acre Usal Redwood Forest, where Mr. Hrubes was working, which the foundation acquired in 2007 with a $65 million bank loan. The foundation needs to pay down its debt. It reaped $19.5 million selling a conservation easement last year, but the idea of a new revenue source is alluring.

"When you need an economic return, one way is to maximize timber harvest," said Tom Tuchmann, the group's acting executive director. "The other way is to look at nontraditional value streams."

But making strategic decisions about how many trees to harvest and how many to use to lock up carbon is an uncertain business. Other carbon markets have generally not done well by investors, and some brokerages have closed their carbon desks.

"There are so many people who are disappointed," said Thaddeus Huetteman, the president of Power and Energy Analytic Resources of Atlanta. "What they are really looking for is for California to show we can create a new market of significance in the world's ninth-largest economy."

science

This article originally appeared in The New York Times.


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