Western Climate Initiative Unveils Draft Of 2012 Cap-and-Trade Program

July 25, 2008

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The Western Climate Initiative, made up of seven U.S. states and four Canadian provinces, has released its “Draft Design of the Regional Cap-and-Trade Program” and its “Draft Essential Requirements of Mandatory Reporting for the Western Climate Initiative.” The plan is for the regional proposal to take effect in 2012

The groups goal is to work together to cut greenhouse gas emissions 15 percent below 2005 levels by 2020. The WCI consists of Manitoba, Quebec, Arizona, California, New Mexico, Oregon, Utah, Washington, Manitoba, Quebec, Ontario and British Columbia.

A key issue – how many pollution allowances will be given away to industries – remains unresolved, The Christian Science Monitor reports.

Limits will be placed on the amount of greenhouse gases that can be emitted regionwide. Polluters will be able to trade allowances with one allowance permitting a polluter the one-time ability to emit a metric ton of a greenhouse gas.

Allowances will be initially distributed among states, but how those states will distribute allowances to industries and individual businesses is being left up to individual states.

Gary Stern, Southern California Edison’s director of market strategy and resource planning, wants to see specifics on how states would initially distribute the allowances, but likes the program’s aim to include many types of industries, unlike the Regional Greenhouse Gas Initiative in the Northeast that targets only electric utilities, The San Francisco Chronicle reports.

RGGI expects to go online September 10 with a blind online auction that allows power generators to compete for the cheapest price for pollution allowances.

The first two RGGI trades, which occurred earlier this year, were in the range of $5 – $10 per ton -much higher than the official price estimate of $2.32 per ton. The initial price signals point to RGGI creating a billion-plus regional carbon market.

Last month, California’s Air Resources Board released a draft plan to reduce California’s greenhouse gas emissions by 30 percent over the next 12 years. Central to the draft plan is the WCI cap and trade program covering 85 percent of the state’s emissions.

Both will play a key role in California’s AB 32, the Global Warming Solutions Act of 2006 , that calls on California to reduce its greenhouse gas emissions to 1990 levels by 2020.

The WCI expects to release its final design recommendations in mid-September – after a workshop next month. At that time, it will also outline a road map of activities and milestones for the WCI through 2009.

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