An unprecedented, multi-sector carbon cap-and-trade plan involving California, six other states and four Canadian provinces to curb their greenhouse gas emissions by 15 percent over eight years was released September 22. The final plan by the Western Climate Initiative is expected to dovetail with California’s groundbreaking climate protection law, AB 32. Stakeholders expect to also link the western carbon trading regime to an East Coast market and others in and outside the U.S. “With all our states and provinces equally committed, we can achieve the largest amount of emission reductions in the world while spurring renewable energy development and creating green jobs,” said Governor Arnold Schwarzenegger of the western trading proposal. The western carbon market plan release was overshadowed two days later by the country’s first carbon auction for the East Coast’s coal-heavy electricity sector. Under the Regional Greenhouse Gas Initiative (RGGI), 12.5 million metric tons of carbon dioxide was on the auction block, according to the organization. “This is a very exciting day,” said Jonathan Schrag, RGGI Inc. executive director. The non-profit organization oversees the auction and provides technical support to the RGGI states. The auction is expected to put a price on carbon. But, the clearing price and the number of allowances sold September 25 were not expected to be available until September 29. “New York stands ready to link our system with the Western Climate Initiative to create a cap-and-trade program that will protect our environment, safeguard our citizens and create a strong, clean-energy economy,” David Paterson, governor of New York, said. The eastern initiative involves 10 northeastern and Mid-Atlantic states and is a mandatory emission reduction scheme, unlike the western one. Another difference between the two coastal carbon markets is that the western proposal, which is set to be launched in 2012, is not limited to power plants. RGGI is estimated to create a $1 billion market. The mandatory program also: -Requires that 90 percent of the carbon allocations representing power plant emissions be sold in an auction, instead of given away for free; -Caps emissions at estimated 2014 levels; and -Seeks a 10 percent decrease of emissions by 2018 from 2014 levels. The western-wide carbon trading scheme is the broadest of the emerging trading markets. It will initially include the electricity sector, oil and gas processes, and industrial sources, but eventually be expanded to include the transportation sector and residential and commercial buildings. The 11 partners of the western trading program represent 20 percent of the United States economy and 70 percent of the Canadian economy. WCI predicts a carbon allowance price of $25 per ton through 2020. Under the blueprint by the Western Climate Initiative, states and provinces need only auction 10 percent of their carbon emissions allowances starting in four years. The western-wide plan and California emissions reduction law seek about the same level of greenhouse gas emission cuts, although they use different annual emission levels, known as baselines, against which to measure reductions. The Western Climate Initiative’s carbon cap aims to cut global warming gases 15 percent below the region’s 2005 levels by 2020. California’s AB 32 requires state greenhouse gases to drop 30 percent below projected 2020 levels--about 14 percent below the 2005 emission levels. “[W]hen expressed on comparable terms, California’s AB 32 requirement is nearly identical to the emissions reduction planned by the WCI Partner jurisdictions,” stated Michael Gibbs, California Environmental Protection Agency assistant secretary for regional climate change. In their joint plan to the California Air Resources Board for how best to slash 40 percent of the electricity sector’s greenhouse gases, a key recommendation of the California Public Utilities Commission and Energy Commission was joining the expected western trading program. The joint agency plan was released September 12 and is expected to be approved by both commissions mid-October. California’s electricity sector produces about 25 percent of the state’s greenhouse gases, second in line to the transportation sector, which is responsible for about 40 percent of the global warming pollution Under the western market proposal, electricity generators or entities sending power to the western grid are responsible for carbon reductions. The Western Climate Initiative plan allows partner states and provinces to decide how to meet the carbon cap and to use a carbon tax in place of a trading market. British Columbia is the only partner to date to have initiated a tax on carbon emissions, but others may follow suit. The western plan would allow up to 49 percent of the carbon reduction obligations to be met by offsets. It “encourages” carbon offsets, such as those created by more efficient factories or retooled power plants, to originate in U.S., Mexico or Canada, but sets no geographic restrictions. The plan also would: - Mandate that power plants and other facilities emitting at least 10,000 metric tons of carbon report their emission levels beginning in 2010; -Increase the auction minimum from 10 percent of total state carbon emission rights to 25 percent; -Allow unlimited saving, or banking, of emission allowances; -Prohibit borrowing allowances from future years to meet current obligations; -Establish a three-year compliance period; and -Set an annual threshold for coverage by the carbon trading program at 25,000 metric tons of carbon dioxide equivalent for polluting entities. Over the next two months, the western climate change partners are expected to develop a more detailed work plan and identify priorities
