Buying offset credits pays emitters in developing countries to emit "less than they would have emitted." But implementing a cap cuts back on what "they would have emitted," and reduces their profits from selling offsets.
The House bill did not create this offset problem. The European Union's cap-and-trade scheme has long allowed European companies to buy UN-certified offset credits instead of cutting their own emissions. As Stanford researchers Michael W. Wara and David G. Victor found over a year ago, Europe's offset purchases have not drawn developing countries into "substantial limits on emissions," but have, "by contrast, rewarded them for avoiding exactly those commitments." As a result of this perverse incentive, Europe's cap-and-trade market is considering rules to ban the purchase of UN offset credits from major developing countries.
One of the offset schemes that Europe might ban involves a type of chemical plant found, among other places, in China. While dumping a notorious greenhouse gas into the atmosphere, the plant's owners suggest to the UN that the plant could incinerate the gas instead – if the owners were allowed to sell offsets. The particular gas emitted is 11,700 times worse than carbon dioxide, so naturally the UN agrees that the owners can sell 11,700 tons of emission offsets for every ton of gas incinerated. With offsets worth about $15 a ton, the profits have been enormous.