Super-Additionality: A Neglected Force in Markets for Carbon Offsets
AbstractClimate change mitigation programs classify two types of carbon offsets: Additional and non-additional. Additional offsets are offsets that correspond to actual reductions in emissions. In contrast, non-additional offsets are offsets that do not correspond to emissions reductions. These offsets are created because offset projects with business-as-usual (BAU) emissions below their assigned baseline can claim offsets up to the baseline without reducing emissions. Since the sale and use of non-additional offsets by firms in climate mitigation programs has the effect of raising aggregate emissions, an extraordinary amount of focus has been on ensuring that offsets are additional. However, we show here that there is an emissions component that has been neglected in current policy design. This component, which we call Super-additional reductions, are emissions reductions which do not lead to a supply of offsets. Super-additional reductions arise from offset projects with BAU emissions above their baseline. These projects are awarded a quantity of offsets that is lower than the project's emissions reductions. The presence of such emissions reductions without supply of equivalent offsets has the effect of lowering aggregate emissions and lessening the impact of non-additional offsets. Our numerical simulations show that super-additional reductions can be as large as the supply of non-additional offsets, and in some scenarios can even exceed them. Neglecting this component during the climate policy design process can lead to the setting of overly stringent baselines or other policy instruments, ultimately raising the compliance costs of achieving emissions reduction targets.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8952.
Date of creation: Apr 2012
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Other versions of this item:
- Kanbur, Ravi & Bento, Antonio M. & Leard, Benjamin, 2012. "SUPER-ADDITIONALITY: A Neglected Force in Markets for Carbon Offsets," Working Papers 128811, Cornell University, Department of Applied Economics and Management.
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-ENE-2012-05-08 (Energy Economics)
- NEP-ENV-2012-05-08 (Environmental Economics)
- NEP-PPM-2012-05-08 (Project, Program & Portfolio Management)
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