September 23, 2008

BC Offside with WCI Greenhouse Gas Reduction Plan

The Western Climate Initiative (WCI) is described on its website as "a collaboration of seven U.S. governors and four Canadian Premiers." That is interesting wording because it reflects the distinction in the US between the executive and legislative branches of government. The seven governors participating in WCI represent the states of: Arizona, California, Montana, New Mexico, Oregon, Utah, and Washington. The governments of BC, Manitoba, Ontario and Quebec are also part of the collaboration.

On September 23 WCI released its design recommendations for a regional cap and trade system to control greenhouse gases. It cautioned that: "much more remains to be done to move from program design to program implementation." A detailed work plan will be developed over the next couple of months, although the recommendations already include implementation dates.

The WCI design made special reference to the carbon tax as an alternative to cap and trade. It said that WCI Partner jurisdictions may use fiscal measures that contribute to achieving overall comparable GHG emission reductions; in particular, the design recommendations said: "British Columbia currently has a carbon tax. By 2012, the WCI Partner jurisdictions will determine the mechanism for integrating the cap-and-trade program with the BC carbon tax." Notice that it is the Partner jurisdictions, not BC alone, who will determine the mechanism for integrating the BC carbon tax with the cap-and-trade program. It would be interesting to know what the current BC position is with respect to that integration, which will require agreement between the Partners on how to quantify GHG emission reductions attributable to the carbon tax, as opposed to reductions attributable to changes in markets, i.e. changes in the price of oil or changes in economic growth.

It is expected that the cap and trade program will begin in 2012 with three year compliance caps initially set at actual estimated emissions for 2012. In 2015 the cap will be increased by the estimate for transportation fuels, and residential, commercial and industrial fuels added for the first time to the program. The program will reduce the annual caps so as to achieve the target GHG reduction goal by 2020. Entities that annually emit over 25,000 metric tons of carbon dioxide equivalents are captured by the program and will have to purchase "allowances" as their license to pollute. An auction within WCI jurisdictions for allowances will be designed by the end of 2009. Mandatory measurement and monitoring of GHG emissions will begin in January 2010 for entities that annually emit more than 10,000 tons of GHG equivalents. With those components of the program in place, the full cap and trade program will launch January 1, 2012.

BC's "2008 Greenhouse Gas Reduction (Cap and Trade) Act" is offside with Section 10.3 of the WCI recommendations which requires third party verification of reported emissions from entities and facilities that will be included under the cap. Section 4 of BC's Cap and Trade Act is based on industry lobbying for the same system that is used by the Ministry of the Environment to regulate other industrial emissions, in particular a system of self-reporting verified by audits at the discretion of the Ministry. My freedom of information requests for details on the current system were refused on the grounds that the documents are cabinet secrets. That refusal is under appeal, but the WCI requirement for third party verification will make the Campbell government's stonewalling irrelevant. If BC is going to participate in the WCI cap-and-trade system, it is going to have to require third party verification of emissions. Anything less could lead to Enron style cheating on what will probably prove to be very valuable "allowances".