Oregon: Currently active (as of 1/2011)
Washington: Currently active (as of 1/2011)
Massachusetts: Program ended on Dec. 31, 2008 (as of 1/2011)
Market Size and Scope
Offset Project Eligibility
Additionality Requirements and Project Methodologies
Project Approval Process
Type of System/Program and Context
Three US states, Oregon, Washington and Massachusetts, have set mandatory CO2 emission standards for their state’s energy facilities. Although the specific programs vary by state, regulated facilities in all states have the option of meeting their emission reduction obligations either through on-site emission reductions or the purchase of eligible offset credits.
In 1997, HB 3283 legislation established Oregon as the first US state to regulate GHG emissions from energy facilities. The regulations were updated in 2003, requiring energy facilities to meet an emission standard that is 17% better than the most efficient base-load gas plant currently operating in the US. This translates to a standard of 0.675 pounds (lbs.) of CO2 per kWh of net electricity output (Oregon Energy Facility Siting Council, n.d.). See www.oregon.gov/ENERGY/SITING/docs/ccnewst.pdf for the most recent standard.
In Washington, HB 3141 legislation governing GHG emission from energy facilities was passed in 2003 and updated in 2004. It establishes a CO2 mitigation plan requiring energy facilities to offset 20% of CO2e emissions over a 30-year period. (Chapter 80.70 RCW,
In Massachusetts, 310 CMR 7.00: Appendix B legislation to cap emissions from six energy facilities at historical emission levels was passed in 2006 (MassDEP, n.d.b). With the start of the RGGI program on Jan. 1, 2009, the Massachusetts plant-specific GHG standards ended at the end of 2008 and are being gradually phased out.
Facilities in all three states may meet their emission standard through on-site emission reductions. In Oregon and Washington, facilities can sponsor their own offset projects or pay a fee to a qualified organization to manage and purchase offsets on their behalf at a cost that is below the market value for offsets.
In Massachusetts, the purchase of certified GHG credits was the only alternative mechanism for compliance in the original regulation. However, on December 24, 2007, the Massachusetts Department of Environmental Protection (MassDEP) determined that insufficient GHG credits were available for affected facilities to demonstrate compliance and they allowed payments into the GHG Expendable Trust, at the trust trigger price set by regulation, as an alternate means of compliance (MassDEP, n.d.a). After another regulation change in May 2008, facilities became allowed to comply using certain offsets generated under the CDM and the EU ETS (MassDEP, 2008).
Program Authority and Administrative Bodies
All three states have a program authority to administer, verify, validate, approve and register offset projects used for compliance with state regulations.
Oregon: The Energy Facility Siting Council.
Massachusetts: The Department of Environmental Protection.
In addition, the Climate Trust was established as the only qualified organization to manage and purchase offset credits using the funds generated from Oregon’s compliance fees. The Climate Trust is an offset project developer as well as an offset retailer (see the Climate Trust for details).
Each state program regulates GHG emission from energy facilities within its state jurisdiction only.
Recognition of Other Standards/ Linkage with Other Trading Systems
Washington and Oregon are both members of the Western Climate Initiative (see section on WCI). It is not yet clear how the power plant rules in Washington and Oregon will be incorporated or revised as the WCI process develops. Emission reductions from these programs may be considered for early action credit under the WCI.
In 2007 and 2008, the Washington Legislature passed laws related to GHG emissions. The 2007 law establishes a GHG intensity requirement for new and existing power plants, which is set at 1,100 lbs of CO2e per MWh (source: Chapter 80.80, Revised Code of Washington, Greenhouse Gas Emissions). The 2008 law establishes a GHG emission reporting program in support of the anticipated WCI cap and trade program.
In Massachusetts, 2007–2008 was the first and only compliance period for the state emission cap on energy facilities. Once the Regional Greenhouse Gas Initiative (RGGI) began in 2009, the Massachusetts program has been phased out. Based on the June 2008 determination of the availability of GHG credits, regulated facilities were able to apply to verify and use European Union Emission Trading Scheme (EU ETS) Phase II Allowances and Clean Development Mechanism (CDM) CERs that are eligible for use under Phase II of the EU ETS for compliance purposes (MassDEP, 2008).
Tradable Unit and Pricing Information
All tradable units, for each of the state power plant programs, are measured in short tons of CO2e.
Oregon term: “CO2 offset". All facilities, to date, have chosen to pay a fee of USD 1.27 per short ton CO2e (USD 1.40 per metric ton CO2e) using a qualified organization (The Climate Trust) to purchase/manage offsets at below the market price of offsets. No facilities have successfully directly implemented their own offset projects and no pricing information is available for this approach.
Washington term: “Carbon Credit”. Facilities can pay a fee of USD 1.60 per metric ton CO2e using a qualified organization to purchase/manage offsets at below the market price of offsets. No pricing information is available for facilities that may choose in the future to directly implement their own offset projects.
Massachusetts term: “GHG Credit.” The first compliance period for regulated sources was from 2007–2008, and several GHG Credit applications have indicated that project developers expect GHG Credit prices to be approximately USD 5.00 per short ton. Payments into the GHG Expendable Trust, a recent supplemental compliance mechanism, are expected to be set at a price of USD 11.04 per short ton of CO2e.
Energy facilities serve as both the program participants and the offset buyers in each of the state power plant programs.
Oregon: Regulation applies to all new energy facilities.
Washington: Regulation applies to all new energy facilities greater than 25 MW in size and existing facilities that increase their energy output by 25 MW or CO2e emissions by 15% or more.
Massachusetts: Regulation applies to six currently existing power generation facilities.
Current Project Portfolio
Oregon: Oregon was the first state with offset transactions for offsets from regulated facilities for compliance. The monetary offset rate payments have remained below the market price for offsets, all six of the new energy facilities regulated under the state power plant rule in 1997 have achieved compliance with the emission standard through payments to the Climate Trust. The Climate Trust reports that payments through the OR program have offset 1.5MmtCO2 (The Climate Trust, n.d.) through a range of project types in the Climate Trust’s offset portfolio (see the Climate Trust).
Washington: None of the new qualifying energy facilities has chosen to purchase offsets for compliance since this legislation came into effect and, as a result, no transactions have occurred. The only new facilities subject to the law and regulation are a few small cogeneration or biomass fueled facilities. The cogeneration facilities had to demonstrate that their CO2 emissions were not subject to the law’s provisions and the biomass facilities have undertaken small self-directed mitigation projects.
Massachusetts: Massachusetts has approved (or proposed to approve) 8 offset projects. In total, 1,441,527 certified GHG credits have been created and 244,694 of those credits have been verified (W. Space, personal communication). All of the verified GHG credits have been transferred into compliance accounts and helf by facilities, no GHG credits have been retired. .
Oregon: Any project which avoids, sequesters or displaces CO2 emissions.
Washington: Any project which avoids, sequesters or displaces CO2 emissions and is approved by the Energy Facility Site Evaluation Council or the Department of Ecology, as applicable.
Massachusetts: Any project which reduces emissions, avoids emissions or sequesters emissions, except for nuclear power generation and underwater or underground sequestration activities.
Oregon: Any location.
Washington: Not specified.
Massachusetts: Anywhere in the United States or the coastal waters thereof. Approved EUAs and CERs have no project location restrictions (MassDEP, 2008).
Oregon and Washington: There are no project size limitations for the Oregon or Washington programs.
Massachusetts: Offset projects must generate an average of at least 5,000 short tons of CO2e per year over the period applied for. For projects not located in Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New Jersey, New York, Rhode Island and Vermont or the coastal waters thereof, the minimum is 20,000 short tons of CO2e.
Oregon: There are no start date requirements for the Oregon program.
Washington: Mitigation projects directly managed by the facility owner must have started after July 1, 2004.
Massachusetts: The start date for offset projects is January 1, 2006.
There are no crediting period specifications for any of the state programs.
Co-benefit Objectives and Requirements
Oregon and Washington: No co-benefit requirements
Massachusetts: No explicit rules, but the program administrators may consider “the extent to which a project may be harmful to the environment or public health when certifying or verifying GHG Credits” (Mass DEP, n.d.b.).
Additionality requirements in all three programs are very general.
Oregon: Offsets must be regulatory surplus and will be evaluated based on the “extent to which the CO2 reductions would have occurred in the absence of the offset project” (Oregon Energy Facility Siting Council, n.d.)
Washington: Offsets must “accomplish CO2 reductions that would not otherwise take place” (Washington Legislature, 2004).
Massachusetts: Offsets must be regulatory surplus, “real and additional” and applicants may be required to “specify the best management practice used to determine an emissions baseline” (Mass DEP, n.d.b.)
Oregon: No specific quantification protocols are provided,. The Oregon regulation simply states that sufficient documentation must be provided to the program administrator in order “to determine what reductions resulted from the projects, based on the monitoring and evaluation the applicant proposes” (Oregon Energy Facility Siting Council, n.d.).
Washington: No specific quantification protocols provided
Massachusetts: Offset project developers must specify the best management practice used to determine the emissions baseline and the quantification protocol used for calculating offset credits, as well as a proposed method for determining, monitoring and assuring compliance (Mass DEP, n.d.b.). All offset project applications must contain a description of potential project leakage, and describe how such leakage was or will be monitored and avoided (Mass DEP, n.d.b.). Offset credits will be voided to the extent of any leakage that is identified (Mass DEP, n.d.b.). To address permanence concerns of carbon sequestration projects the land owner must, at a minimum, “place the land within the sequestration project boundary under a legally binding instrument, acceptable to the Department, that the sequestered emissions remain captured and securely stored in perpetuity” (Mass DEP, n.d.b.).
Validation and Registration
Oregon: The program administrator reviews the project additionality and baseline quantification materials submitted for an offset project sponsored by a regulated entity. Validation of offset projects is carried out by the program administrator based on the review of submitted materials.
Washington: Offset projects must be approved by either the program administrator, the Washington State Energy Facility Site Evaluation Council or Department of Ecology or a local administrator, and must be included in the regulated entities’ site certificates or order of approvals.
Massachusetts: There are no offset project validation or registration requirements. All offset projects are reviewed and approved through either the prospective or the retrospective certification process discussed in the section below.
Monitoring, Verification and Certification
Oregon: Offset project monitoring, verification and certification are carried out by the program administrator. The program administrator ensures that the proposed project is implemented by including restrictions in the site certificate for regulated facilities, but may not require that “the applicant guarantee that it will achieve the predicted CO2 offsets from these projects” (Oregon Energy Facility Siting Council, n.d.).
Washington: There are no explicit verification or certification requirements, but the legislation states that “implementation will be monitored by an independent entity” (Washington Legislature, 2004).
Massachusetts: Certification and verification of offset projects are based on approval by the MA Department of Environmental Protection. Certification can take place either prior to project implementation (prospective certification) or after implementation (retrospective certification). Verification of offset credits must occur within two years of project activity. Applications for project certification and verification must contain a complete project description, a quantification protocol, an estimate of the offset credits generated, a monitoring methodology and the expected offset sale price.
Registries and Fees
Oregon: No registry exists for tracking offset projects, but the program administrator holds “in trust the CO2 offsets that the certificate holder provides in order to meet the CO2 standard” (Oregon Energy Facility Siting Council, n.d.).
Washington: No registry requirements exist for tracking offset projects or credits generated.
Massachusetts: The GHG Registry serves as the Massachusetts state registry to track offset credits used for compliance under the state program.