E - Offset Testing

All additionality tests are trying to answer the same question

Never has so much been said about a topic . . .

2003 Extreme vs. Loose additionality and CDM offset supply for 2010

2003 MACC with additionality screening for 2010

2003 MACC with additionality screening for 2020

2008 Gresham's Law rephrased

2008 Scoring additionality on a 0-1000 scale - energy efficiency

2008 Scoring additionality on a 0-1000 scale - riparian reforestation

2008 Scoring the additionality of an offset portfolio on a 0-1000 scale

2008 That additionality concept - 1

2008 The challenge of widely varying sectoral additionality

2009 Slide - Custom vs. Standardized Rules

2009 Slide - Not All Offsets are Created Equal

2009 Slide - Offset Rules Will Determine Offset Outcomes

2009 Slide - Supply Depends on Offset Rigor

2009 Slide - The Criteria Offsets Need to Meet

2009 Slide - Voluntary Market Standards

2010 Business as Usual" reductions in the U.S. - our own calculations

2011 The cause and effect relationships in assessing offsets

2011 The definition of additionality is often circular

2012 Example of how emissions for a prospective baseline scenario might appear

2012 Example of how emissions from a historical baseline scenario might appear

2012 Illustration of baseline movement due to regulatory changes

2012 Process for determining the baseline and demonstrating additionality

2012 Seven main principles that relate to additionality

2014 Approach to assessing project level additionality - key components

2014 Assessing additionality (improving reference case)

2014 Farms adopting with and without payment

2014 How to calculate additionality

2015 AAU surplus converted to potential tons

2015 Additionality "investment analysis" rarely transparent

2015 Additionality claims worst for large projects

2015 Based on a random sample many additionality claims not plausible

2015 Big surpluses were built into the Kyoto Protocol's targets

2015 Environmental integrity appears to vary by the evaluating entity

2015 Environmental integrity can vary dramatically across sectors and countries

2015 Environmental integrity of six largest JI projects in sample

2015 Environmental integrity of the six largest project types

2015 JI project additionality claims got worse over time

2015 Plausibility of additionality claims of sample set of 60 JI projects

2015 Project types in JI and relative magnitudes

2015 Track 2 JI much better, but very small fraction of credits

2016 Assessment of additionality on credits during first commitment period

2016 Assessment of additionality on credits during second commitment period

2016 Average IRR impact of CER revenues by project type

2016 How additional is the CDM?

2016 Overall evaluation of CDM project types

2016 Potential CER supply

2016 Projects considered automatically additional as microscale project activities

2016 Projects considered automatically additional under small-scale project activities

2017 Offset supply and likelihood of additionality with CDM projects

2017 Potential trade-off between number of projects, quality, and effectiveness

2017 Project Additionality

2018 Gas emitters regulation reduction options 2007 - 2011

2019 Decision-making tree for additionality assessment under Art. 6.2 and 6.4

2019 Example baseline approaches for different project types

2019 Examples for mitigation project additionality by project type, baseline, type of activities, additionality risks

2019 Examples of how GHG programs approach baseline setting

2019 List of how different GHG programs address additionality

2019 There are many potential baselines when thinking about national actions and targets

A rough cost distribution of legitimate offsets

A successful offset protocol should by definition suggest an adequate screening for additionality

Additionality “testing” is a misnomer

Additionality approaches used in various offset standards and programs

Additionality has been the biggest challenge to carbon offsets

Additionality screening has to account for human behaviors, making it more uncertain

And expressed as ERUs

Any offset protocol is (very) likely to include at least some false positives

Broekhoff_EPRI_Additionality[1]_10

Broekhoff_EPRI_Additionality[1]_11

Broekhoff_EPRI_Additionality[1]_12

Broekhoff_EPRI_Additionality[1]_13

Can greater demand solve additionality?

Carbon offset baselines vs. additionality

Carbon offset mitigation benefit vs. additionality

CDM Additionality Tool - Version 5

Defining additionality

Definitions proposed for additionality

Different groups may behave very different, with significant consequences for additionality screening

Different sectors perform very different when it comes to additionality thresholds

Different sectors perform very differently in terms of “offset confidence”

Discounting the number of offsets tells you nothing about their environmental credibility

Distribution of wind farms in the U.S.

Evaluating the additionality of ag-based offset credits - nitrogen fertilization corn

Even tests for physical variables like pregnancy are not infallible

Forestry offset provide a lot of co-benefits

Gaming of offset rules will generally increase the likelihood of false positives getting into the offset pool

Hypothesis testing can never be perfect, and it’s not for carbon offsets

If you don’t think about false positives, you can’t draw any conclusions about offsets’ environmental integrity

In designing most tests, you can know whether you got it right or wrong. Not so for additionality.

It is not easy to assess the additionality of an offset pool

Large markets + additionality screening is the best situation

Legitimate carbon offsets have to be traceable to the carbon offset market

Many additionality “proxies” have no obvious empirical basis.

Many of the additionality “proxies” being used have not been empirically validated.

Many physical tests are first evaluated on how they balance false positives and false negatives

Measurement and monitoring cannot substitute for additionality screening

No offset pool can be perfect

Not all offset criteria should be judged equally, including for scoring purposes

Offset economics are at least a useful initial additionality screen

Offset profit margins and cost-effectiveness vs. environmental integrity

Offsets come down to a confidence assessment

200X One additionality continuum example - coalmine methane

One of the few papers looking at the performance of forestry offset projects

Potential additionality tests

Practice adoption vs. receiving payments for adoption

Project vs. standardized additionality screening

Project-level and program-level additionality have to correlate

Representative additionality stringency supply curves for 2010

Representative additionality stringency supply curves for 2020

Representative regional offset supply curves

Representiative sectoral offset supply curves

Saying offsets are limited in number says nothing about their additionality or effectiveness

200X Scoring additionality on a 0-1000 scale - coalmine methane

Some additionality bottom lines

Someone has to decide the acceptable balance of false positives and false negatives

Summary of metrics for selected conservation practices

200X The additionality continuum - energy efficiency

200X The additionality continuum - nuclear energy

200X The additionality continuum - riparian reforestation

The Catch-22 of additionality screening

The CDM Additionality Tool

The distribution of CA's forestry offset projects

The implications of ignoring additionality

The potential supply of false positives is probably larger than you think

The problem is that false positive tons are probably dwarfing false negative tons in the offset pool

The question of “how many false positives is too many” is not a technical question

The theoretical offset supply

The theoretically potential supply of carbon offsets

There is no way to “test” for additionality the way we “test” for pregnancy

There is no way to minimize for false positives and false negatives simultaneously

Use of offsets in California's climate change policies

Variations in additionality terminology in climate policy literature - 1

We all understand that some guilty individuals will be found innocent in a courtroom

We all understand that some innocent people will be found guilty in a courtroom

We inuitively understand that fewer falsely guilty outcomes is more important than more falsely innocent outcomes

We should all recognize that some “false positive” tons will make it into a carbon offset pool

We should all understand that some “true positive” tons will be excluded from offset pools

We should all understand that we’re trading off false positive and false negative tons

We should take advantage of the best possible information when it comes to additionality screening

What can we really say about additionality screening?

What perfect additionality screening would look like

What potentially overly strict additionality screening looks like

What reasonable additionality screening might look like

What weak additionality screening looks like

Where legitimate offsets fit in the scheme of avoided emissions and removals

Why market size matters to additionality screening

Wind capacity by power grid

Without adequate additionality screening, offsets can’t maintain environmental integrity

“Additionality fatigue” is not new

2009 Slide - Markets are Growing Rapidly

2009 Slide - Press Coverage Follows Market Activitiy

2009 Slide - The importance of offsets

2009 Slide - The Importance of Clear Objectives

2009 Slide - The Voluntary Carbon Market

Additionality matters because there are SO many “anyway tons.”

Because offsets justify emissions, they have to meet certain criteria

Only “additional” offsets can generate “additional” co-benefits

Potential offset supply in a world on track for a 2oC scenario

Potential offset supply in a world without adequate public policy

Additionality can be operationalized if we recognize the context in which it has to operate

Additionality comes down to the "why" of an emissions reduction

Additionality has gotten more confusing over time

Additionality is a means to an end, not an end

Additionality policy design principle #3

Basing emissions trajectories on scenario analysis and modeling is challenging, and there is a risk of inflated baselines and over-crediting due to the uncertainties

Conceptually, the need for of additionality is very simple

Definition of additionality

GHG market fundamental #1

GHG market fundamental #2

GHG market fundamental #3

GHG market fundamental #4

GHG market fundamental #5

GHG market fundamental #6

GHG market fundamental #7

If getting a market going is the key goal, be transparent about it

Illustrative additionality tests

Is additionality really important?

It is possible to put together an effective additionality testing system - but it may require a lot of work

Setting avoided deforestation baselines is more challenging that setting baselines for other project types

Setting sectoral performance standards for entire sectors can reduce the risk of over-crediting

Statistical concept #1

Statistical concept #2

Statistical concept #3 - errors can't be fully eliminated

Statistical concept #4 - the approriate error balance is specific to the nature of the test

The additionality challenge is common to all offset systems

The additionality wars could continue forever

The relative proportions of "phantom reductions" and "lost opportunities" depends on multiple variables

The report uses an incorrect definition of additionality

There is no difference between project, sectoral, and policy additionality

There is no universally right answer to additionality, but it is critical to the market