On July 27th, the Western Climate Initiative (WCI) released details of its strategy to reduce regional greenhouse gas (GHG) emissions by 15 percent below 2005 levels by 2020. The WCI is a regional collaboration among seven American states and four Canadian provinces (Quebec, Ontario, British Columbia and Manitoba) to fight climate change and global warming. The document that was made public is billed as a roadmap to assist WCI members (known as partner jurisdictions) in developing and implementing regulations. The program start date is set for January 1, 2012. The first stage of the program will target generators emitting more than 25,000 tonnes of GHG annually.
The program aims to put a price on emissions, and offers an incentive to innovate and find new ways to reduce emissions.
The main feature of the program is a series of integrated cap-and-trade programs implemented through state and provincial regulations. Each participating partner jurisdiction will issue emission allowances to meet its specific emissions goal. Partner jurisdictions will use that cap to form a regional allowance market, where each participant recognizes one another’s allowances for compliance. Emissions allowances issued by each jurisdiction will be usable throughout the jurisdictions for compliance purposes.
The cap-and-trade program includes tight emissions reporting requirements that ensure accurate and timely measurement and recording of GHG emissions by the entities included in the program.
At least once every three years, targeted entities must turn in province one “emission allowance” for each metric ton of carbon dioxide equivalent (CO2e) emissions they emit and report. Consequently, the number of allowances issued will be reduced over time. Anyone can trade emission allowances, so those who succeed in reducing their emissions below the number of allowances they hold can sell whatever they have in excess or save them for a rainy day. By selling excess allowances, an entity can make up some of its costs in reducing emissions. Holding allowances for later use can also befit entities by reducing future compliance costs.
A lot can still happen to torpedo the initiative. Proposition 23, on the California ballot this fall, is intended to derail the state’s signature climate-change law. Also, Arizona, Utah, Washington, Oregon, Montana and Manitoba have all announced that they will delay joining the emissions market, out of fear of rising energy prices.
But if it does see the light of day, the WCI will be North America’s second biggest market for emissions allowances, after the Regional Greenhouse Gas Initiative (RGGI).
Aside from the integrated cap-and-trade program, the WCI strategy aims to encouraging GHG emissions reductions in industries not covered by the emissions cap, help reduce energy costs across the region and promot energy efficiency policies and programs through energy innovation in high-emitting industries. There are also plans to help individuals transition to new clean-energy jobs.
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