The new draft proposal is here.
Just the major points. First off, the proposal is basically pretty good. We should keep in mind that what the Western Climate Initiative (WCI) is doing represents a big—gigantic—step in the right direction for the climate. So I’ll raise a glass to everyone who’s worked so hard on the WCI proposal so far.
But there’s room for improvement. Below, I highlight the core areas of the proposal. These are bedrock issues that make me concerned.
Transportation is in. Sort of.
It appears that transportation fuels—the region’s largest source of carbon pollution—will be delayed until 2015, the second “compliance period.” The document is not crystal clear, but in Section 6, “Setting the Regional Cap,” it says that the regional cap will be adjusted in 2015 to add both transportation and the natural gas that is used in homes and businesses. (See 6.3). It’s critical that we included transportation fuels ASAP.
Auctioning is in limbo.
WCI appears to be punting on this hugely important question. In past communications they’ve said that states and provinces will be required to auction a minimum percentage of between 25 and 75 percent of their allowances. In today’s draft (see 8.7) they say this:
The issue of establishing a minimum percentage of allowances subject to auction by each Partner is still under discussion by the Partners. The Partners expect to make a recommendation on this issue by Fall, 2008.
That’s not wildly helpful. But in defense of WCI, they do include quite a bit of language about how the value of allowances are to be used (Sections 8.2 and 8.3) most of which are clearly good public interest goals.
Offsets are on the table.
WCI is apparently considering allowing offsets in the amount of 10 percent of any regulated firm’s allowances. They say, “not greater than 10 percent of an individual entity’s or facility’s compliance obligation” (section 9.2). (A firm’s compliance obligation is its total amount of carbon emissions.) Since WCI is shooting for a 15 percent reduction, allowing a firm to submit offsets to cover 10 percent of its total emissions is tantamount to allowing offsets to cover more than half of all the WCI reductions. In my judgment, 10 percent is probably much too high a figure. We shouldn’t have so much confidence in offsets. (For more on the trouble with offsets, see this excellent 2-page summary from economist Chris Busch with the Union of Concerned Scientists. It’s California-centric, but completely relevant to WCI.)
A strange loophole, maybe.
Finally, there’s some odd language sprinkled throughout the document that appears to nudge open the door for some states or provinces to avoid capping transportation fuels. In Section 1.4, for example, the document says:
WCI Partners acknowledge that individual jurisdictions may instead utilize comparable fiscal measures, such as British Columbia’s carbon tax, to address transportation fuels and fuel use by residential and commercial sources.
That would be a mistake. Consistency and comprehensiveness are key to the program’s success. To use this particular example, BC’s carbon tax can easily integrate with a cap and trade program (the taxes would basically become a “reserve price” in the auction system). But a legal cap on carbon is important because it makes certain we meet our climate targets.
The WCI draft is a start on a cap-and-trade system, and I’m grateful for that. The best thing about this proposal is its broad scope and the inclusion of transportation.But I think you’re being a little too kind on the details:Offsets: 10% is definitely too high. Even if one argues that the total reductions proposed are more like 40% (given expected growth to 2020), that still means that 1/4 could come from offsets. This is way too much, especially since we know that the goal of a return to 1990 levels by 2020 is almost certainly too weak.If offsets are strictly a cost-containment measure, then why not disallow them except when the price of allowances exceeds a cost ceiling? Otherwise they will drive the price of permits down and undermine the whole system.Late start: 2012 start, 2015 for transportation. Why are we dragging our feet like this. In fact, reductions don’t actually kick in until 2013 (2016), since it is designed to be started at a status quo level. Where is the sense of urgency? This is 2008. We could start this in 2010.Allocations: Each state/province will determine its own approach to apportioning allowances. On the face of it, this sounds like a reasonable way to avoid deadlock between states on this issue. In practice, it seems likely to lead to a race to the bottom. Auctions will be fought tooth-and-nail if your neighbors/competitors are getting permits for free; and why buy in an auction anyway if the market is going to be flooded with lower-priced permits coming from giveaway states?A failure to auction most/all permits is extremely unfair to early reducers.Exclusions: Exclusion of CO2 emissions from biomass/biofuels. This creates a leak in the cap unless those fuels are carbon neutral, and most are not at this point. A lifecycle analysis needs to be applied to all fuels.Tree plantations should be excluded from offsets—they are not ecologically benign. Conservation tillage should be excluded because it is already widely adopted for a whole host of other reasons and is almost certainly not additional.
Eric de Place
Phil,You raise some fair points here. I plan to take up many of these issues in more depth in the next week or so—stay tuned.
What is WCI an Acronym for? It might help so that the average reader knows what this is about.
Eric de Place
Right you are, Ken. It’s fixed.
I’m also concerned that the rate of decrease driving the auctions is far too low. Scientists say that we must decrease GHG emissions to 80% of 1990 levels by 2050; WCI proposes a short term goal of 15% below 2005 levels by 2020.If you straightline that 80% between now 2050, you get a dramatically higher required 2020 reduction (2005 levels were already 20% higher than 1990). But the reductions needed are even faster than straightlining; they really need to occur at a rate proportional to the current year’s emissions (like how interest is paid on a loan). Otherwise, you push impossibly difficult reductions onto future generations.