California Air Resources Board

SACRAMENTO - The Air Resources Board announced today it will issue the first compliance offset credits eligible for use in California’s cap-and-trade greenhouse gas emissions reduction program.  Carbon offset credits are issued for greenhouse gas emission reductions that take place in sectors not covered under the cap-and-trade program.  Each credit represents one metric ton of carbon dioxide and only carbon offset credits issued by the Air Resources Board are considered compliance offset credits.  The issuance of the carbon offset credits by the Air Resources Board follows an extensive evaluation process including third-party verifications that protocols were strictly followed.

"Issuing the first compliance-grade carbon offset credits marks an important step forward for the cap-and-trade program and California's efforts to fight climate change," said Air Resources Board Chairman Mary D. Nichols. "These offsets have undergone the most rigorous verification of any existing program. They achieve real greenhouse gas reductions under ARB-approved protocols, and deliver a range of additional environmental benefits." 

Covered facilities may use carbon offsets to cover up to 8 percent of their compliance obligation.  Carbon offsets also act as a cost-control measure for covered facilities because offsets generally cost less than allowances, which are issued by the state. In addition, carbon offsets come from projects that provide significant additional environmental benefits beyond the reduction of greenhouse gases. These include, for example, protection of the ozone layer, or supporting improved forest management which upgrades water quality and habitat. 

The Air Resources Board has begun the process of issuing compliance offset credits for both early action projects and compliance offset projects.  The first compliance offset credits are all for projects developed under the Ozone Depleting Substances Protocol.  This protocol requires the destruction of potent greenhouse gases that leak into the atmosphere. Eligible ozone depleting substances have been used as refrigerants and as foam-blowing agents.  Their release into the atmosphere damages the earth’s ozone layer and also contributes to global warming.

The Air Resources Board has also begun the process of recognizing offset credits for early action projects. Those are greenhouse gas emissions reductions generated under Air Resources Board-approved voluntary carbon registry protocols. These credits for early action recognize that real and verified greenhouse gas reductions were made in good faith before the cap-and-trade program began.

For carbon offset projects to be considered for Air Resources Board offset credits, they must first be registered with an Air Resources Board-approved carbon registry. Each project developer must then provide a complete history of the project. That documentation and the project site itself must be evaluated by Air Resources Board trained, independent, third-party verifiers.  Air Resources Board staff then review each project as well. This process provides the most rigorous and stringent verification methodology in the world.

Offset credit issuance is a three-step process:

• Project developer requests that Air Resources Board issue compliance offset credits, and supplies supporting documentation.

• Once ARB verifies the documentation and makes a determination, credits issued by approved offset registries must then be retired.

• ARB then issues that number of compliance offset credits for use under the cap-and-trade program.

Air Resources Board compliance offset credits will be issued within the Compliance Instrument Tracking System Service (CITSS), the same system in which state-issued allowances reside. Once the determination to issue credits is made by ARB, it can take up to 30 days for the credits to be placed in the holder's account in CITSS. The current batch of 600,000 offsets -- for a combination of early action projects and compliance offset projects -- are likely to be issued before the end of the month.

The Air Resources Board currently has 4 approved offset protocols that can generate compliance-grade carbon offset credits:
1. Forestry Management  Projects (in the lower 48 states)
2. Urban Forestry Projects
3. Dairy Digester Projects (to capture methane from manure at dairy facilities)
4. Ozone Depleting Substances (ODS) Destruction Projects 
For more information about the early action program, compliance offset program, or compliance offset protocols: https://www.arb.ca.gov/cc/capandtrade/offsets/offsets.htm