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The WCI Cap & Trade Program PDF Print E-mail

The WCI jurisdictions are recommending a broad cap-and-trade program to reduce greenhouse gas pollution, spur growth in new green technologies, help build a strong clean-energy economy, and reduce dependence on foreign oil. This program is an important component of WCI's comprehensive regional effort to reduce GHG emissions by 15 percent below 2005 levels by 2020. 

This multi-sector program is the most comprehensive carbon-reduction strategy designed to date. When fully implemented in 2015, it will cover nearly 90% of greenhouse gas emissions in WCI Partner states and provinces, including those from electricity, industry, transportation, and residential and commercial fuel use.

Based on extensive study of existing programs, economic analysis and extensive stakeholder consultation, the WCI cap-and-trade program is designed to lower the cost of achieving emission reductions and mitigate the economic impact on consumers and businesses.  It will also help spur growth in new green technologies, help build a strong clean-energy economy, and enhance North American energy security.

This program can stand alone, provide a model for, be integrated into, or be implemented in conjunction with programs that might ultimately emerge from the federal governments of the United States and Canada.

 

The Program in Brief

The Design Recommendations for the WCI Regional Cap-and-Trade Program were released by the WCI on September 23, 2008, after 18 months of extensive analysis, stakeholder consultation, and deliberation.  The program design:

  • Provides opportunities to obtain low-cost emission reductions through emission trading, allowance banking, and inclusion of an offsets component.
  • Is intended to mitigate economic impacts, including impacts on consumers, income, and employment.
  • Balances all principles adopted by the WCI Partner jurisdictions to maximize total benefits throughout the region, including reducing air pollutants, diversifying energy sources, and advancing economic, environmental, and public health objectives, while also avoiding localized or disproportionate environmental or economic impacts.

  

What Will Be Covered

The WCI cap-and-trade program will cover emissions of the six main greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) from the following sectors of the economy:
  • Electricity generation, including imported electricity
  • Industrial and commercial fossil fuel combustion
  • Industrial process emissions
  • Gas and diesel consumption for transportation
  • Residential fuel use

  

A Phased Introduction

Covered entities and facilities will be required to surrender enough allowances to cover emissions that occur within each three-year “compliance period”. The first phase of the cap-and-trade program begins on January 1, 2012, covering emissions from electricity, including imported electricity, industrial combustion at large sources, and industrial process emissions for which adequate measurement methods exist. The second phase begins in 2015, when the program expands to include transportation fuels and residential, commercial and industrial fuels not otherwise covered.

  

Allowances, Banking, and Offsets

By including features such as allowance banking and offsets, the design recommendations support a strong and balanced cap-and-trade program that takes advantage of a broad set of economic opportunities from reducing greenhouse gases. A limited number of allowances will be available to entities and facilities covered by the program. It is important to note that emissions allowances are not considered property rights. Rather, they are permits that authorize firms to emit a specified amount of greenhouse gases. Companies covered by the rules will be able to purchase allowances at auction, buy and sell them on secondary markets, or bank them for future use. In certain cases companies also will be able to purchase a limited number of offset credits that reflect reduced carbon emissions elsewhere. They may also be able to purchase allowances from other comparable cap-and-trade programs approved in the future.

  

Eye to the Future

The WCI Partners have designed a pioneering stand-alone regional cap-and-trade program that will immediately begin to address climate change in the absence of broader national or international standards.  But the Partners also recognize that long-term compatibility is key.The WCI cap-and-trade program is designed in such a way that it can provide a model for, be integrated into, or work in conjunction with any future U.S. or Canadian emissions-reduction programs. The WCI Partners continue to advocate for national and international greenhouse gas emission reduction programs that are consistent with the WCI cap-and-trade design principles.