Washington (Platts)--10Nov2009/1114 pm EST/414 GMT

The US Senate climate-change bill should permit greater use of international carbon offsets, major electric utilities and offset developers said on Tuesday.

"We are concerned about the further restrictions on the use of international offsets in S. 1733," the Coalition for Emission Reduction Projects said in a letter to Senators John Kerry, a Massachusetts Democrat, Lindsey Graham, a South Carolina Republican, and Joe Lieberman, a Connecticut Independent. The three are leading an effort to develop climate legislation that can attract bipartisan support in the chamber.

"The cost containment provided by international offsets is dramatic and critical," the group said, adding that "[e]very major study of greenhouse gas regulation has reached this conclusion." The coalition also pointed to the Environmental Protection Agency's economic analysis of the House of Representatives cap-and-trade bill (H.R. 2454) that projected costs of a cap-and-trade system would increase by 89% without these offsets.

The three senators are working on changes to S. 1733, which was approved earlier this month by the Senate Environment and Public Works Committee, without Republican support. The bill would set an annual 2 billion metric ton cap on offsets, with 75% coming from domestic sources and 25% from international sources. The House bill (H.R. 2454) approved in June also would set a 2 billion mt cap, but split the percentages equally between the two types.

The group listed the benefits of the offsets for greenhouse gas emitters, including the fact that they will be a critical bridge to when low-carbon technologies are in place. While the coalition did not propose what offset level its members would prefer, it said "arbitrary discounts or other barriers...only diminish their cost containment potential."

A group spokesman could not be reached immediately for comment.

The group, however, recently voiced support for a domestic offset bill (S. 2729) introduced November 4 by seven Senate Democrats, saying it likes the bill's language on forestry credits, its oversight design between the Environmental Protection Agency and Department of Agriculture, and backing for early creation of offsets before a federal trading program begins. The bill would not alter overall domestic offset levels contained in the House and Senate measures, but does lay out provisions to boost credit generation and to ensure projects make real, additional and verifiable emission reductions.

Coalition members include American Electric Power, Duke Energy, PG&E, Dominion, EcoSecurities, Camco Global, NatSource, and Blue Source.