Estimates of Future Supply of International Greenhouse Gas Offsets: A Critical Review

This 2010 report by the Stockholm Environment Institute reviews the projected supply of international greenhouse gas (GHG) offsets, specifically evaluating how these estimates impact U.S. cap-and-trade legislative designs. The authors analyze the use of marginal abatement curves (MACs) and identify significant discrepancies between optimistic techno-economic models and more conservative market-based projections.

• Estimates of international offset supply vary significantly depending on the methodology used. Studies utilizing marginal abatement curves (MACs) as direct supply curves are highly optimistic; for instance, US EPA's MACs suggest an annual availability of approximately 6.4 billion tons CO2e from developing countries in 2020. In contrast, carbon market observers who extrapolate from historical trends estimate supply between 1.5 and 2.5 billion tons per annum.
• Gross international offset supply is expected to exceed the demand from U.S. entities under current Congressional cap-and-trade designs by 2020. While gross supply estimates range from 1.5 to over 6 billion tons CO2e, U.S. demand for the Waxman-Markey bill is estimated between 0.4 billion tons CO2e (CBO) and almost 1.3 billion tons CO2e (US EPA) per annum.
• The net supply of offsets available to the U.S. will likely be reduced by competition from other governments and entities with emission obligations, such as those in the EU. Additionally, mitigation measures undertaken by developing countries as part of their own contributions (e.g., Nationally Appropriate Mitigation Actions or NAMAs) may further constrain the available supply.
• There is a systematic difference between top-down and bottom-up MAC approaches across different sectors. In energy-related CO2 and avoided deforestation, bottom-up analyses generally show greater abatement potentials at lower costs. Top-down models are better at reflecting economic inter-relationships and indirect impacts like emissions leakage, but often lack the technology-specific detail required for offset crediting.
• Many offset supply assessments fail to systematically consider critical design and market factors. Key missing or under-analyzed elements include the stringency of crediting methodologies (often assuming a "ton is a ton"), the establishment of international governance structures, and the lag times required for the administrative and technical scale-up of crediting infrastructure.
• Avoided deforestation (REDD) represents one of the largest abatement potentials in developing countries but remains highly controversial. Because of this, it was excluded from the Kyoto Protocol's Clean Development Mechanism (CDM) and has been limited primarily to voluntary offset markets, accounting for only 1% of total transactions in 2008.
• Non-CO2 gas abatement potentials are significantly lower than those for energy-related CO2 or avoided deforestation. US EPA estimates for 2030 place total abatement potentials for methane, nitrous oxide, and fluorinated gases at approximately 2,000 MMT CO2e at prices above $10 per metric ton.
• The report identifies a significant gap in research regarding the interaction between global offset supply and future demand. This lack of analysis is described by the Carbon Trust as "the greatest single weakness in the current negotiating process."

APA

Erickson, P., Lazarus, M., & Kelly, A. (2010). Estimates of Future Supply of International Greenhouse Gas Offsets: A Critical Review. Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/SEI-ProjectReport-Erickson-EstimatesOfFutureSupplyOfInternationalGreenhouseGasOffsets-2010.pdf

Chicago

Erickson, Peter, Michael Lazarus, and Alexia Kelly. Estimates of Future Supply of International Greenhouse Gas Offsets: A Critical Review. Stockholm Environment Institute, 2010. https://www.sei.org/mediamanager/documents/Publications/SEI-ProjectReport-Erickson-EstimatesOfFutureSupplyOfInternationalGreenhouseGasOffsets-2010.pdf.

Wikipedia

{{cite report |last1=Erickson |first1=Peter |last2=Lazarus |first2=Michael |last3=Kelly |first3=Alexia |title=Estimates of Future Supply of International Greenhouse Gas Offsets: A Critical Review |publisher=Stockholm Environment Institute |date=2010 |url=https://www.sei.org/mediamanager/documents/Publications/SEI-ProjectReport-Erickson-EstimatesOfFutureSupplyOfInternationalGreenhouseGasOffsets-2010.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{erickson2010estimates, author = {Erickson, Peter and Lazarus, Michael and Kelly, Alexia}, title = {{Estimates of Future Supply of International Greenhouse Gas Offsets: A Critical Review}}, institution = {Stockholm Environment Institute}, year = {2010}, url = {https://www.sei.org/mediamanager/documents/Publications/SEI-ProjectReport-Erickson-EstimatesOfFutureSupplyOfInternationalGreenhouseGasOffsets-2010.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }