As the number of jurisdictions committed to cap-and-trade in North America slides, the commitment of remaining participants is gaining strength. This evolution comes in the wake of last year’s dissolution of the Midwestern Greenhouse Gas Reduction Accord, a proposed but abandoned regional cap-and-trade system.
Regional Greenhouse Gas Initiative (RGGI): Nine northeast states participate in the regional CO2 cap-and-trade program. The system is limited to the power sector, where it is mandatory. RGGI has been under stress recently. New Hampshire narrowly maintained its participation when the state’s House of Representatives passed a bill repealing involvement which was subsequently vetoed by the Governor. Maine established its participation as contingent on a minimum threshold of other participants. New Jersey’s Governor has announced that the state will withdraw at the end of 2011.
RGGI started a program review in September, 2011 to be published in spring 2012. The review will examine whether RGGI can achieve real emissions reductions and speculation suggests there may be a tightening of the emissions cap. In recent auctions allowances cleared at the price floor, suggesting excess allowances with respect to capacity for obligated parties to reduce emissions. Positively, an economic analysis released in conjunction with the review revealed that RGGI has added US$1.6 billion to the regional economy.
Western Climate Initiative (WCI): The regional cap-and-trade initiative has changed significantly in recent months. All US partner states except California withdrew from the program in late November, soon after the initiative announced the formation of a non-profit corporation to provide administrative and technical support for the scheme. WCI, Inc.’s Board of Directors includes representatives of Quebec, British Columbia and California.
The scheme has been delayed by one year, and will come into force January 1, 2012. However, covered entities will not be accountable for emissions obligations until 2013. Reduction targets will stay the same, implying a steeper reduction responsibility in the first compliance period. All WCI partners agreed to extend the full start date, though it is expected that California and Quebec will be the only jurisdictions prepared to begin in 2012.
