The Design for the WCI Regional Program is the
culmination of two years of work by seven U.S. states and four
Canadian provinces.
Supported by their individual jurisdictional goals, the objective
of the WCI plan is to reduce regional GHG emissions to 15
percent below 2005 levels by 2020. The regional goal will be
reached by:
- Creating a market-based system that caps GHG emissions
and uses tradable permits to incent development of
renewable and lower-polluting energy sources
- Encouraging GHG emissions reductions in industries not
covered by the emissions cap, thus reducing energy costs
region wide, and
- Advancing policies that expand energy efficiency
programs, reduce vehicle emissions, encourage energy
innovation in high-emitting industries, and help individuals
transition to new jobs in the clean-energy economy.
"Scientific research confirms that our water resources,
natural ecosystems, air quality, and environment-dependent
industries like agriculture and tourism will continue to be
significantly impacted by changes in climate if we do not act to
reduce GHG emissions. Furthermore, studies have shown that the cost
of inaction is high," said WCI in a prepared statement.
Absence of national leadership
The WCI partners are strongly committed to continuing to
provide leadership in the development of affordable, innovative
clean-energy solutions that will create new jobs and reduce our
dependence on imported oil, helping protect consumers from volatile
petroleum prices, according to the statement.
In the absence of federal action to
address climate change, the WCI Partner jurisdictions believe it is
important for state and provincial governments to keep moving
forward on the transition to a clean-energy economy and continue to
lead in demonstrated areas of expertise, including energy
innovation, efficiency, and conservation.
A recently-updated
economic analysis by the WCI indicates the plan can achieve the
regional GHG emissions reduction goal and realize a cost savings of
approximately US$100 billion by 2020.
The economic analysis underscores that mitigation of GHG
emissions and the move to a clean-energy economy is affordable, and
can be achieved without negatively impacting the regional economy.
This result is consistent with other recent state and federal
analyses of climate mitigation programs.
The WCI Regional Cap-and-Trade Program
The central component of the WCI comprehensive strategy is a
flexible, market-based, regional cap-and-trade program that
encourages the most cost-effective, reliable alternatives to reduce
GHG emissions.
The WCI cap-and-trade program will be composed of the
individual cap-and-trade programs implemented through state and
provincial regulations. Each partner jurisdiction will issue
"emission allowances" to meet its jurisdiction-specific emissions
goal. The total number of available allowances serves as the "cap"
on emissions.
A regional allowance
market will be created by the Partners by each accepting one
another's allowances for compliance. These allowances can be sold
between and among covered entities as well as by third
parties.
This "trading" of emission allowances is expected to keep
costs low because it provides flexibility in how and when
reductions are made. For example, entities that reduce their
emissions below the number of allowances they hold can sell their
excess allowances or "bank" them for later use.
Selling excess allowances allows entities to recoup some of
their emissions reduction costs, while banking allowances will
lessen future compliance costs.
The WCI program includes important features to ensure that the
program achieves the regional emissions goal affordably and
cost-effectively. For instance, emission offsets from sources not
covered by the program can be used in limited quantity along with
emission allowances to comply with the program. Allowing entities
to turn in allowances in three-year periods provides flexibility as
to when emissions reductions are made.
A Flexible, Affordable Program
The WCI program recognizes that variations in jurisdictional
authority, regulatory procedures, and administrative requirements
will result in different approaches to implementation.
While not all WCI partner jurisdictions will be implementing
the cap-and-trade program when it begins in January 2012, those
expected to move ahead comprise approximately two-thirds of total
emissions in the WCI jurisdictions - a critical mass and a robust
market for achieving significant GHG emissions reductions.
The program also reflects an understanding that potential
future conditions could lead to higher-than expected program costs.
To ensure that the program is not only affordable, but also
supportive of economic growth and job creation, the WCI partners
are considering a number of options to address unforeseen
circumstances. These include an allowance reserve in the event of
high-price conditions, increased flexibility regarding compliance
periods, and special purpose mechanisms to address specific local
conditions.
Next Steps
Between now and the planned program start date of January 2012, the
WCI will address remaining program design issues and take the steps
necessary to make regional trading operational. In addition, they
will expand their efforts to develop and implement other core
policies and programs to increase energy efficiency and fuel
diversification in order to reduce GHG emissions.