September 24, 2008

WCI Releases Design Of Regional Cap-and-Trade Program

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The Western Climate Initiative has announced recommendations for the design of a regional market-based cap-and-trade program. The group released a draft of its program in July.

The WCI – consisting of seven Western states and four Canadian provinces – initiative is endorsed by 11 governors and provincial premiers, and aims to reduce regional GHG emissions by about 15 percent below 2005 levels in 12 years.

The initiative calls for a cap on GHG emissions and covers nearly 90 percent of the region’s emissions, including those from electricity, industry, transportation, and residential and commercial fuel use. Together, the seven states and four provinces represent over 70 percent of the Canadian economy and 20 percent of the U.S. economy.

The first phase of the cap-and-trade program will begin in 2012, with a three-year compliance period. The second phase will begin in 2015, when the program is expanded to include transportation fuels and residential, commercial and industrial fuels not already covered in the first phase.

The news comes as the Regional Greenhouse Gas Initiative prepares to hold its first auction for permits of more than 12 million tons of emissions in September, but experts have said that the auction could see a drop in demand.

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.

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