Discussion Paper

International Greenhouse Gas Offsets Under the Clean Air Act

Apr 7, 2010 | Nathan Richardson


Offsets, and in particular international offsets, have been advanced as an important tool in climate policy, capable of significantly reducing the costs of emissions reductions. As attention turns to theexisting Clean Air Act as a potential vehicle for general reduction of greenhouse gas emissions, an important question is whether regulation under the statute is compatible with international offsets. This paper analyzes the regulatory programs under the Clean Air Act that are the most likely candidates for greenhouse gas regulation and concludes that many of them are legally incompatible with international offsets. Those programs that might permit use of international offsets have other problems that make them unpopular choices for greenhouse gas regulation. To the extent that Clean Air Act regulation depends on state action, state law and constitutional limitations appear to offer more barriers than opportunities foruse of international offsets. These conclusions have implications for the costs and flexibility of climate policy under the Clean Air Act.

International greenhouse gas offsets have been identified as a valuable tool for controlling the costs of reducing carbon dioxide emissions. While most climate proposals under consideration in Congress include offset provisions, their legislative future is unclear. In the meantime, the U.S. Environmental Protection Agency (EPA) plans to use rules under the Clean Air Act (CAA) to regulate greenhouse gas emissions (GHG).  How—and whether—international offsets fit into this scenario remains to be seen.

In “International Greenhouse Gas Offsets Under the Clean Air Act,” Nathan Richardson examines whether EPA programs have the regulatory capacity to govern offsets, finding little evidence of a good fit in CAA provisions.

Richardson concludes that, for most CAA programs, international offsets are either precluded by the statute or would require a legally ambitious and risky reading of statutory language. Those few CAA programs that might be more compatible with international offsets are a poor fit for GHG regulation in general, and have their own legal limitations.

Even among advocates of CAA regulation of GHGs, says Richardson, comprehensive climate legislation is generally viewed as a superior alternative. One important justification for this belief is the inaccessibility of cost savings from international offsets under CAA regulation.