Greenhouse gas offsets in a domestic cap-and-trade program

This brief presents the key issues and identifies options for the incorporation of greenhouse gas (GHG) offsets into emerging U.S. climate change policy. A GHG offset represents a reduction, avoidance, destruction, or sequestration of GHG emissions from a source not covered by an emission reduction requirement. The elimination of GHG emissions can be converted into tradeable offset credits, and cap-and-trade programs can be designed to permit firms to use these credits to meet their compliance obligations. A carefully crafted and implemented offset program can significantly reduce cap-and-trade compliance costs by providing lower cost emission reduction options.