Recently, Clean Air-Cool Planet (CACP) released A Consumer's Guide to Retail Offset Providers (Download-PDF>, a report put together by my firm (Trexler Climate + Energy Services, or TC+ES). Some offset providers have been complaining about the priority the report assigns to "additionality" in evaluating and ranking retail offset providers. So what's the issue? Why is everyone arguing over the concept of whether or not retailers are selling "additional" emissions reductions as retail offsets?

The idea behind additionality seems simple. But as I've noted before, that’s the devil of additionality - a seemingly simple concept upon which we can’t seem to agree on when it comes to implementation. I’ve talked about additionality before in these columns, but let me re-state the definition of additionality as it is used in the recent CA-CP report:

Additionality: Emissions reductions are "additional" if they occur because of the incentives associated with the existence of GHG markets. A variety of additionality “tests” have been proposed, but at its root demonstrating additionality means showing that the emissions reductions being used as offsets are not “business as usual.”

Neither CA-CP, which commissioned the report, nor TC+ES, which authored the report, invented this definition. It is widely accepted in the field, and it makes intuitive sense. Why should we ask consumers to spend their money on retail offsets that are from projects that would have happened anyway? Reductions happening anyway are inherently incapable of rendering other emissions climate neutral.

I suspect that most market participants would agree in principle that “additional” projects are what we want to promote. Where things get trickier is how to apply this definition in assessing additionality at the offset level, and we’re the first to acknowledge that it’s a tricky area. In fact, we published an entire paper exploring the subject of additionality not too long ago (available from TC+ES). We concluded that no single magical test for additionality exists, but that it is possible to design a trading system that approaches additionality in a way that protects the environmental credibility of the overall market.

Which brings me back to answering the original question, of why we focused so heavily on additionality in the CA-CP report.

Answer: Because additionality matters!

I’ll draw on a recent Bonneville Environmental Foundation statement to help me set up the point:

“We believe that replacing an objective, independently verifiable record of the value of renewable generation - fundamentally, that any megawatt-hour of renewable generation is offsetting a megawatt-hour of fossil-fired generation - provides a far more sound basis for quantifying and commodifying carbon offsets than any subjective evaluation of "additionality."

I certainly agree that it would be much easier all around to count all renewable energy as “additional” on the grounds that it displaces fossil fuel emissions. And clearly, renewable energy projects do generate energy that would otherwise come from fossil fuel sources. But such an approach to additionality quickly becomes problematic. What other activities displace fossil fuel emissions in the same way, and should therefore qualify for market participation rights under such an approach? Quite a few:

1. Nuclear energy generation displaces fossil fuel emissions, to the tune of hundreds of millions of tons of CO2 per year.
2. Natural gas generation displaces coal generation, to the tune of hundreds of millions of tons of CO2 per year.
3. Energy efficiency displaces fossil fuel emissions, to the tune of hundreds of millions of tons of CO2 per year.
4. Tree planting takes carbon dioxide out of the air, to the tune of hundreds of millions of tons of CO2 per year.

These activities together add up to billions of tons of “displaced” CO2 emissions per year. Add in several hundred million tons of displaced CO2 emissions from renewable energy projects, and you’re talking some pretty big numbers! With all these reductions, why aren’t we already in compliance with targets like the Kyoto Protocol?

The problem is that most of these “reductions” are “business as usual.” They’re happening for reasons having nothing to do with the existence of the retail offset market, or even global warming mitigation goals. They’re happening because they already make sense, or because of federal tax policy, or because of high energy prices. Should we count all of these displaced tons as “reductions” and hence as carbon offsets simply because it’s easier to quantify and commoditize them? It would indeed be an easier market to operate, but it would be a market with zero environmental significance. We could spend enormous sums buying and selling such “offsets” and not reduce emissions from what they would have been without the existence of the market! What’s the point?

The fact is that if one wants to structure a market that results in incremental environmental benefit, additionality does matter! Period. And if we want environmental markets to remain credible enough to be used for compliance against future carbon mandates, we need to protect the credibility of early GHG markets.

Critics might argue that I’ve mischaracterized their position. I doubt they would characterize their position as being to argue that all nuclear energy generation should count as offsets, or all tree planting, or all natural gas generation, or even all energy efficiency. I suspect that advocates of the simple additionality test proposed by BEF would say they are arguing that renewable energy generation, even business as usual renewable energy generation, is “different” from and in effect morally superior to other sources of CO2 displacement or sequestration, and should “count” as offsets accordingly. But the atmosphere doesn’t care where “non-additional” reductions are coming from (or not coming from as the case may be). Renewable energy proponents often argue that counting all renewable energy as additional will incentivize more renewable energy projects at the margin. But they don’t explain why exactly the same logic doesn’t apply to nuclear energy, energy efficiency, or tree planting! At the end of the day, the moral status of different sources of business as usual reductions is irrelevant to the goal of mitigating global warming, which requires that we be doing lots of different things that aren’t already happening.

One of the things we should be doing is promoting carbon offset markets that can help reduce GHG emissions, while also playing a key role in educating consumers about global warming and global warming policy. But this requires that we find ways to select and target emissions reductions that are additional as defined above, whether we’re talking renewable energy or landfill gas.

Because if you care about global warming mitigation, additionality does matter.