What are the benefits of incorporating offsets into a cap-and-trade system?
Including offsets in a larger cap-and-trade system can provide the following benefits[4]: Reduced costs. Estimates suggest that many opportunities for mitigation in uncapped sectors are likely to be less expensive than those available to capped facilities.[5] Offsets may be an important interim tool to help capped facilities meet compliance targets in the short term while they shift toward lower-carbon facilities. For these and other reasons, a sufficient supply of offsets can be a vital element, if not the most important element, for reducing the overall cost of meeting the cap. Engagement of additional constituencies. Offsets can deliver financing and new technology to sectors and countries outside of the cap, thereby giving them a reason to engage in a cap-and-trade policy. Domestically, an offset market can provide an additional revenue stream for forest and agricultural landowners. Internationally, the Clean Development Mechanism (CDM), an offset program sanctioned by the United N
