Cap and Trade: Offsets and Implications for Alaska

The Environmental Protection Agency (EPA) has formally declared that greenhouse gases (GHG) pose a threat to public health and the environment. This is significant because it gives the executive branch the authority to impose carbon regulations on carbon-emitting entities. United States GHG emissions have increased by approximately 17 percent between 1990 and 2007, and the EPA now has the authority to design regulation to reverse this trend. One of the regulatory tools being considered is a cap and trade system, whereby a ceiling is set for allowable carbon dioxide emissions and emitters are allowed to purchase offsets if they exceed their allowable emissions. Forests are major carbon sinks, and reforestation or projects to avoid deforestation are considered an offset with a monetary value under a majority of cap and trade systems. Alaska has vast forest resources including the largest national forest in the Nation. Alaska’s forest accounts for 17 percent of all U.S. forest land. This paper provides an overview of a cap and trade system, the role of offsets, and the potential impact on Alaska’s forest stakeholders.