How do biofuels fit into an offsets program?
The production and use of some types of biofuels may release fewer greenhouse gas emissions than traditional fossil fuels, placing these biofuels at a competitive advantage in meeting emission reduction targets. That said, the particular treatment of biofuels in an offsets program depends on the scope of the cap-and-trade system as well as whether fuels are regulated upstream (e.g., refineries), downstream (e.g., power plants or vehicles), or by a low-carbon fuel standard. Any greenhouse gas emissions reductions achieved via biofuels as compared to fossil fuels should not be “double-counted” (credited for the same emission reductions more than once). If fossil fuels are regulated under a cap,[8] then there will be an incentive to use lower-emission biofuels, an incentive that will translate into increased demand for biofuel feedstocks. In such a scenario, it is unlikely that biofuels would qualify as an offset.
