Carbon targets must be achievable: Regulator

Voluntary carbon offset markets need clearer regulatory leadership and goals to help deliver meaningful greenhouse gas reductions, one of California's top regulators said today.

Guidelines for voluntary carbon reduction investments should match those in California or other regulated markets, Rajinder Sahota, California's Air Resources Board deputy executive officer for climate change and research, told participants attending the Argus North American Biofuels, LCFS & Carbon Markets Summit.

Environmental regulators must oversee such crediting to ensure root environmental goals are met, she added.

"At their core, these programs are meant to reduce emissions – climate change – they are not about market goals," Sahota said. "It is going to be very hard to see the voluntary market converge into a compliance program unless you have direct oversight and enforceability by a regulator."

The nascent voluntary carbon offset market offers to connect businesses and carbon-reducing projects operating outside of jurisdictions such as California, where such lower-carbon efforts are required.

Skepticism about the utility of these offsets has climbed with the volume of money and corporate pronouncements committed to their use. Democrats in the US House of Representatives earlier this month called for clear, federal standards defining global voluntary carbon offsets.

Investment needs a middle ground between voluntary crediting rules that are ineffectively lax or impossibly hard to achieve. Voluntary offsets must quickly support meaningful, achievable reductions in carbon, Sahota said.

"To the extent that action can be taken across all sectors, and somebody is willing to pay for it, and it is robust action that is verifiable, that should be allowed to happen," Sahota said.

Quick and effective approaches included allowing carbon capture and sequestration projects, biofuels use in California's transportation supply and transitioning petroleum refineries rather than shuttering them, she said. The state cannot achieve its objectives by putting the state's petroleum transportation and energy systems at risk.

"It is not politically or publicly or socially acceptable to actually turn off energy in the state of California," Sahota said, referencing pleas for energy conservation last week as a heat wave seared the state. "In order for us to move away from petroleum, we actually need to first build out the things we want to go to."

Sahota also defended the volume of unused credits amassed in the state's cap-and-trade program.

California lawmakers last month rejected a bill that would have required periodic reviews of the state's cap-and-trade carbon allowance supply. The proposal failed in late August with 34 of 80 possible votes in support. The bill would have required a review of "overallocation and offset credit eligibility" every three years. The proposal followed an estimate earlier this year that participants banked for future use roughly 321mn t of credits – equal to nearly three years of the combined obligations reported by major state refiners Chevron, Marathon Petroleum and Phillips 66.

But that volume was just 5pc of the total credits still needed to meet 2030 requirements, she said.

"Is that OK for hedging an economy-wide market in California?" Sahota asked. "Some will say yes, some will say no."

Updated modeling as part of a broad state environmental policy review scheduled to end later this autumn will guide any future action, she said.

By Elliott Blackburn