WCI's new proposal

What the Western Climate Initiative does right -- and what it could do better

Posted by Eric de Place (Guest Contributor) at 2:09 PM on 24 Jul 2008

Draft is here [PDF].

Just the major points. First off, the proposal is basically pretty good. We should keep in mind that what 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 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 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 [PDF] 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, B.C.'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.

For story: WCI's new proposal
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Bigger problems

What stood out to me when I read this document is that there are a number of small problems that when bundled together make this essentially unworkable. The big issue that is only marginally addressed in the whole WCI process is the baseline for emissions. It appears that the baseline for the 2012-2015 compliance period will be the 2010-2011 emissions, (that is the first time when they will have direct reporting data). If that's true, then no emitter has any incentive to limit their emissions until 2012. And in fact, they have an incentive to emit higher than normal CO2e during 2011-2012 in order to skew the baseline.

Add this to the fact that the WCI will not allow any early action credits (except in direct competition with reduction credits during the first compliance period), and you have a recipe for a truly stupid policy. If this goes ahead as proposed, then no one has any reason to begin to control their GHG emissions until 2012. I think delaying any and all action to reduce GHG emissions for at least another 4 years is not a good policy.

And this is all besides the more crucial point that the legal basis for the WCI is flimsy at best, and likely to fall apart in 2009 when the legislatures attempt to adopt the laws. Without good federal legislation (better than Lieberman-Warner), or some other broader and more legally sound base from which to plant a cap-and-trade system, this will simply not work.

Much as I hate to say it (because cap-and-trade always seemed like a good idea to me) I think that BC has the right idea for the right way to tackle climate change on a local level: a simple carbon tax. The way things are going, lobbyists are going to gut any cap-and-trade system with massive unregulated offsets, no auctions of permits, a "safety-valve," and/or simply argue over baselines and the calculations over how much CO2e should be allowed. An expensive carbon tax is the more direct and easier to implement policy to raise the price of GHG emissions and to re-orient our economy away from fossil fuels.

by econfitzgerald at 3:07 PM on 24 Jul 2008

WCI and the cap and trade

excellent comments by econfitzgerald, thanks for your insight. Cap and trade seems fraught with problems and room for interference by special interests. We have already wasted way to much time, there is no evidence that contradicts the current science on global warming and it is long past time that we take strong and aggressive measures to protect the future for our children and grandchildren. A simple, strong, tamper proof carbon tax is essential. It is clear that neither industry or for that matter the American people will take serious steps to reduce global warming until is starts to cost them significant amounts of money. Recent driving habits are a perfect example. The american people did not slow their consumption of gas, start to demand smaller cars, turn to mass transportation or drive less miles out of a realization that these actions benefit the world community or even their very own children and grandchildren. No, they did it because the price of gas became intolerable and the same must hold true for carbon. A revenue neutral carbon tax introduced fairly and with moderate increases will bring about that realization.

by cepdppk at 9:23 PM on 25 Jul 2008
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