North America Climate Change: WCI Releases Detailed Cap-and-Trade Strategy

Aug 12th, 2010 | By | Category: Canada, Climate Change

On July 27th, the Western Climate Initiative (WCI) released a comprehensive blueprint for reducing regional greenhouse gas (GHG) emissions to 15 percent below 2005 levels by 2020. The centerpiece will be a series of integrated, market-based cap-and-trade systems scheduled to begin operation on January 1, 2012. This will eventually address up to 90 percent of economy-wide emissions in the WCI partner jurisdictions. The program’s first stage would cover those generators emitting at least 25,000 tonnes of GHG per year.

Early Implementers

Although there has been no official confirmation, it is anticipated that WCI partners British Columbia, Ontario, Quebec, California and New Mexico will be the first to implement their individual cap-and-trade programs and issue “emission allowances” to meet a jurisdiction-specific emissions cap. These jurisdictional allowances would be accepted by other WCI partners, and tradable permits would be sold among the prescribed GHG generators and third parties.

The WCI plan would allow additional states and provinces to join the system after the January 2012 start date. These could include the other current WCI partners — Manitoba, Arizona, Montana, Oregon, Utah and Washington. In addition, Nova Scotia, Saskatchewan and the Yukon, together with another dozen states in the United States and Mexico, have sought observer status with the WCI. WCI partners have been working on their detailed “Design for the WCI Regional Program” since 2007.

Program Features

The cap-and-trade strategy will provide economic incentives for companies to use renewable energy, less carbon-intensive fuels and more energy efficient technologies while encouraging process improvements. Offset certificates will reward emissions reductions in sectors without emissions caps, such as forestry and agriculture. The WCI estimates that a tonne of carbon emissions will be trading at US$ 33 by 2020.

The strategy requires high-quality emissions data reporting and setting of program emission limits. Maintaining competitiveness and preventing “emissions leakage” (with production shifting to nonpartner jurisdictions) are important goals. A fair and transparent auction and a well-functioning market will also be established. The WCI’s core design parameters will ensure compatibility between jurisdictions while allowing for flexibility in regulatory language and approach.

To reduce the total amount of emissions, the number of issued allowances will be reduced over time. At least once every three years, regulated entities will be required to retire one emission allowance for each metric ton of carbon dioxide equivalent (CO2e) they emit and report. Entities that reduce their emissions below the number of allowances they hold can sell their excess allowances or hold them for later use. WCI partners will also

  • encourage GHG emissions reductions in industries not covered by the emissions cap
  • expand energy efficiency and fuel diversification programs
  • tackle transportation emissions through vehicle emission and fuel standards
  • help individuals transition to jobs in a “clean-energy” economy

 

Next Steps

Between now and 2012, WCI partners will hammer out the final program design issues and put the necessary administrative systems and infrastructure in place. WCI is also working with the Canadian and United States federal governments to promote national and international action and ensure coordination among state, provincial, regional and national programs. Discussions are ongoing with other climate change initiatives — including the Regional Greenhouse Gas Initiative and the Midwestern Greenhouse Gas Reduction Accord — to explore further opportunities for collaborative action.

Full details on the strategy are available through the WCI website at http://westernclimateinitiative.org/the-wci-cap-and-trade-program/program-design

About the Author

Paul Manning is a Partner and Certified Specialist in Environmental Law at Willms & Shier Environmental Lawyers, LLP in Toronto, Canada. His environmental law practice includes energy and climate change law, tribunal and appellate advocacy, environmental regulatory law and defense to prosecution. Willms & Shier specializes in environment, energy, resources and aboriginal law.

Photograph: University of Virginia Rotunda Dome Room by Michael Bittner, Winchester, Massachusetts, U.S.A.

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