Today, the Western Climate Initiative (WCI) released a draft of recommendations for a market-based system to reduce global warming pollution. In August, the WCI will accept public feedback based before making final recommendations in September.

The draft statement can be found here:

and here:

A well designed cap and trade system can effectively reduce the pollution that causes global warming, boost the Northwest’s growing clean energy economy, and reduce our dependence on fossil fuels – which is the only sure way to stabilize rising energy costs. The WCI can do all these things in a fair and efficient way that benefits everyone by 1) including transportation emissions, which are the biggest source of global warming pollution in the West; 2) calling for a maximum percentage of auctioned pollution permits which will protect consumers and reduce huge windfall profits for polluters; 3) and ensuring that revenue from the system benefits the public – especially low-income communities.

Here is an overview of the WCI draft proposal released today and some key opportunities for the WCI leadership to increase the effectiveness and fairness of the plan in its final draft:

Transportation emissions included, but delayed

  • Transportation fuels – the region’s largest source of carbon pollution – will be delayed until 2015, the second “compliance period.”
  • There is some language throughout that opens the door for states or provinces to avoid capping transportation fuels through “comparable fiscal measures,” such as carbon taxes. However, consistency and comprehensiveness are key to the program’s success. A legal cap on carbon is important because it makes certain we meet our climate targets.
  • In order to achieve a real cap on carbon pollution, it must cover all major sources of emissions. For more analysis on the importance of transportation emissions, please see: Transportation in a Cap and Trade System.

Auctioning is in limbo

In past communications, the WCI has said that states and provinces will be required to auction a minimum percentage of between 25 and 75 percent of their allowances. Today’s draft says that the minimum number of auctioned permits is still under discussion. The value of allowances is designated to be used for public interest goals like investments in alternative energy technology, so fewer auctioned permits equates to fewer public benefits—while the costs to consumers remain the same.

Giving away pollution permits for free usually means windfall profits for polluters at the expense of consumers. Auctioning 100% of the pollution permits is most fair because it puts everyone on an equal footing. For more analysis on the importance of auctioning pollution permits, please see: Cap and Trade and Consumer Fairness.

Overconfidence in offsets

WCI is considering allowing offsets in the amount of 10 percent of the 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). Since WCI is shooting for a 20 percent reduction, allowing a firm to submit offsets to cover 10 percent of its total emissions is tantamount to allowing offsets to cover half of all the reductions. (For more analysis on offsets, please contact Jessica Coven, Policy Specialist, Climate Solutions,

For frequently asked questions about cap and trade, visit Cap and Trade for the West: FAQs.

Find more resources on climate policy on Sightline’s website:

July 24, 2008