Lessons learned in the 2022 legislative session, and what comes next
The 2022 legislative session resulted in one, and only one, positive climate victory. The Community Energy Efficiency Development Block...
SB 14, The Clean Fuel Standard Act, is supported by the fossil fuel industry and represents another delay and deflect tactic. Rather than slow walking a transition to cleaner fossil fuels, the legislature should be singlemindedly focused on a transition to electric vehicles and improved public transportation. The real purpose behind this bill is the establishment of a carbon credit market in New Mexico. Carbon credit markets are intended to create a way for an individual or a company to pay for someone else to reduce emissions in order to cover emissions that they CAN’T reduce themselves.
Both the Clean Future Act and the Clean Fuel Standard Act introduced in the legislature this session are masquerading as environmental bills while actually requiring the government to petition for complex trading schemes, in 2025 and 2024 respectively, to allow utilities and oil and gas companies to pursue offsets, trades, and financial shuffling rather than enacting real emissions reductions.
The Clean Fuel Standard Act directs the Environmental Improvement Board (EIB) to adopt a Clean Fuel Standard (CFS) that reduces the climate impacts of transportation fuels in New Mexico by a minimum of twenty percent below 2018 levels by 2030 and by a minimum of thirty percent below 2018 levels by 2040. The central mechanism for implementation established by the bill is a system whereby individuals and companies can earn “credits” by reducing emissions, and then sell those credits to individuals or companies who won’t meet the applicable standard.
When evaluating carbon trading schemes one has to ask: Were the credits sold based on accurately measured emissions reductions? Are those companies buying credits truly unable to reduce their emissions, or did they calculate that buying credits would be cheaper and easier? Would greater emissions reductions be achieved if both the buyer and the seller of those credits were simply mandated to reduce emissions or face penalties? In most cases carbon credit markets are difficult to accurately quantify and enforce, they allow corporations to purchase cheap credits while continuing to pollute above an agreed-upon cap, and greater emissions reductions could be achieved through courageous legislative action.
Legislative action to require emissions reductions does not have to include trading schemes that depend upon unverifiable offsets and credits. NMED and EMNRD are already underfunded and understaffed, making enforcement of existing standards difficult. Simple alternative solutions to transport sector emissions like strict fuel efficiency standards for vehicles and mandating a percentage of electric vehicles to be sold in New Mexico would be much more effective.
SB 14 is unlike Clean Fuel Standards introduced in California and Oregon in one important way. An independent analysis of the Clean Fuel Standard Act by Stillwater Associates highlighted the fact that unlike other Clean Fuel Standards in operation in California and Oregon, this one allows non-transport sector parties to earn credits, including oil and gas and a host of others.
Specifically the analysis notes:
"An additional factor, so far unique to the proposed NM policy, is the broadly defined provision for generation of credits by industries other than transportation and transportation fuels. This provision is created by Paragraph 3.D.(5) of SB 11 –
D. No later than twenty-four months after the effective date of the Clean Fuel Standard Act, the department shall petition the board to promulgate rules to implement the Clean Fuel Standard Act. The rules shall:
(5) establish a mechanism for a person to generate credits, including persons involved in agricultural, aviation, chemical, dairy, energy, film, forestry, manufacturing, mining, oil and gas, waste management or wastewater treatment sectors;"
In the FIR filed last time this bill was introduced NMED wrote:
“The creation of a CFS, tied to climate impacts, invites the oil and gas industry to participate in waste recovery mandates (pending rulemaking before the Oil Conservation Commission) and ozone precursor emission controls (pending proposed rulemaking before the EIB) into economically recoverable, climate impact reducing innovations. These new opportunities can generate credits. The predictable schedule of the decreasing climate impact standard allows for [businesses to] fund projects based on the credit market. The market process allows the project that delivers the greatest reduction in climate to be most valued, regardless of the industry sector in which it occurs.”
Yes, you read that right. It appears the actual purpose of this bill is to allow the oil and gas industry to earn credits for reducing their emissions (including required reductions under recent methane and ozone precursor rulemaking!) and sell those credits to companies that can’t or won’t reduce their own emissions.
The world cannot offset its way to carbon neutrality. All emissions will need to be eliminated eventually, so the question is, will these bills result in actual emissions reductions that CAN’T be achieved through market forces or existing legislation, or are they just schemes to earn more profit for utilities and oil and gas executives who otherwise WON’T do the right thing, even if mandated by courageous lawmakers to do so? Simple alternative solutions like strictly enforcing emissions reduction targets should be explored.
WHAT ARE CARBON OFFSETS AND CARBON CREDITS?
Carbon offsets are projects that are claimed, often unverifiably, to save specified amounts of emissions. These supposed savings are treated as if they were equivalent to actual emissions reductions. Offsets usually run in parallel with cap and trade schemes in which the cap is supposed to set a limit on pollution.
Carbon offsets generate credits which can be sold to polluters to allow them to emit pollution over and above their cap. Because credits are often designed to be cheaper or easier than actual emissions reductions, they are attractive to businesses that want the cheapest or easiest way out of reducing emissions at source.
THERE ARE THREE KEY QUESTIONS TO ASK WHEN IT COMES TO CARBON OFFSETS AND CARBON CREDITS:
1. Are the carbon credits being earned and traded a result of emissions reductions that would otherwise not be achievable through direct action like regulation and enforcement? For example - An oil and gas company captures methane at a drilling site, thus reducing emissions, and then sells its carbon credit to a utility that didn't reduce emissions. Is the credit earned justifiable when the government could have simply enforced methane capture technology for oil and gas wells?
2. Are the polluters buying credits making a cynical calculation that buying credits is cheaper than just reducing emissions? Using the same example above - is the utility company that purchased the credit truly unable to reduce emissions, or did they just decide that it's cheaper to buy a credit? The question is whether the polluter truly CAN'T reduce emissions, or simply WON'T because the government is not requiring them to do so.
3. In those cases when an industry truly CAN'T reduce emissions, are the emissions credits being purchased based on accurately measured and enduring reductions?? In most cases, the CO2 credits being counted include questionable mechanisms such as planting or maintaining trees that could burn in a year or two, sending all that credit up in smoke. The European Commission published a 2017 study revealing that 85% of carbon offset projects under the UN’s Clean Development Mechanism failed to reduce emissions.
Offsets do not reduce emissions. In fact, they do not even compensate for emissions, as they are advertised to do, merely creating an illusion that something is being done about climate change. Instead, they allow emissions to continue and thus exacerbate global warming. Further, as research on offset projects in the global South has demonstrated, they violate human rights of local communities and Indigenous Peoples and result in land grabs. In moving the responsibility for reducing emissions from one location to another, often from countries in the global North to countries in the South, they not only make climate change worse but also increase global inequality.
Carbon offsets, credits and trading schemes are designed by the fossil fuel interests that are promoting them around the world to obscure the truth. The most effective, rapid and just climate solutions are simple and direct - the Government must mandate reductions from every industry and incentivize the adoption of clean renewable energy. No ifs, ands, or buts.
A Net Zero number achieved through questionable accounting gimmicks is not the same as REAL zero. Actual emissions reduction is the only barometer that counts.