Is it time to regulate the voluntary carbon market?

Republican Congressmen Darrell Issa and Tom Davis have asked the Government Accountability Office to assemble a report (pdf) on the voluntary market for carbon offsets.

Just last week I was asked in a TreeHugger interview whether I favored government regulation or voluntary industry standards in the voluntary market. I said:

Voluntary industry standards, definitely. For all of the attention it has received, the voluntary offset market is tiny – probably less than $10 million annually in the U.S. A ton of policy innovation is still taking place, and industry can move a lot more nimbly than government to address these issues. The first Green-e retail offset standard should be available this summer. It will reflect the cumulative input of dozens of stakeholders, and it will represent a real leap forward in transparency and consumer protection.

Perhaps when the market matures a bit more, there will be room for regulation. I’m certainly open to the idea, but the devil is really in the details. A lot of the issues that people care about most, such as additionality, aren’t all that simple to legislate.

So do we oppose this new government effort to assess the industry? Not at all. In fact, we’ve long assumed that regulation is inevitable and in fact will be a very good thing for the industry. Government standards will go farther than industry self-regulation ever can to boost consumer confidence.

The risk, of course, is that any legislation that isn’t well-considered could end up stifling an emerging industry rather than helping to grow it. By waiting to let the market develop a bit further, regulators can gain worthwhile insight into its operation. But the letter from Representatives Issa and Davis lays out a sensible set of issues to explore, and we’re eager to see the report.

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