The effect on the electricity sector of a cap and trade program and the First Jurisdictional Deliverer (FJD) approach to capture emissions associated with imports was previously reviewed for Western Partner Jurisdictions in the Electricity Leakage Analysis Summary Report. Reflecting the differing circumstances for Eastern electricity markets required a second analysis.  Partners contracted with Navigant Consulting to:  model the impact of the proposed WCI caps in the three Eastern WCI Partners on power imports and exports; estimate the GHG emission content of the power imports; and estimate the potentials for leakage and contract shuffling. Included in the analysis was the effect on leakage and contract shuffling if linkages were in place with the Regional Greenhouse Gas Initiative or the Midwestern Greenhouse Gas Reduction Accord. 

Results of the analysis are now being released in the report Electricity Imports, Exports and Leakage in the Eastern WCI Partners: Quebec, Ontario and Manitoba. 

In general, the study found significant leakage would occur with a cap and trade program, in terms of reduced generation and emissions within the WCI jurisidictions offset by increased generation and emissions in non-WCI jurisdictions.  Using an FJD approach reduced the amount of imports into WCI, but did not affect the significant reduction in overall exports from WCI.  Allowing contract shuffling would increase the impacts.  These results raise a question now being considered by the Electricity Team of whether a border mechanism should be introduced to address competitiveness effects on electricity exports.

The WCI Partners note that, as with any detailed modeling analysis, specific results depend on the assumptions and the characteristics of the model.  In particular, as noted by Navigant, while the assumptions around generation represent one of many scenarios, they cannot and do not reflect current reality or the actual future.  For example, the model includes new natural gas power plants in Quebec, while Quebec has made clear it has no intention to build new natural gas power plants, as described in the Quebec 2006-2015 Energy Strategy and the Hydro-Quebec Strategic Development Plan.  Also, again as noted by Navigant, the model uses fixed demand and generation assets, which in reality would change in response to a cap and trade program. 

The results of the study should be taken as indicative of trends and impacts of cap and trade and specifically the potential for leakage in the electricity sector, and do not constitute a forecast of generation or demand for the Partner jurisdictions. The release of this study by the Partner jurisdictions does not represent an endorsement of the specific projections on generation, demand, or trade of electricity.