January 20, 2009


Posted on January 20, 2009 by David Flannery

The Advisory Groups working on the Midwest Greenhouse Gas Reduction Accord and the Midwest Governor’s Association Platform met in Indianapolis on January 14 and 15, 2009 for the purpose of advancing the development of recommendations for a regional program to reduce greenhouse gases. While the program being developed contemplates a regional cap and trade program, much work is being focused on the development of complimentary policies that would be implemented outside the cap and trade program. 

            The December 2008 draft recommendations of the Advisory Group, calls for a cap and trade program that would be applied to all six greenhouse gases. Initially, the cap and trade program would apply to electricity generation and imports, industrial combustion sources, and industrial process sources for which there are credible measurement in monitoring protocols. In addition, transportation fuels are being considered for inclusion in the cap and trade program based on the results of economic modeling that is currently being performed. Heating fuels will be included in the second three year compliance period. 

Significantly, the cap and trade program would be applied both to electricity generated within the region and to electricity imported into the region. In the latter case, the point of regulation for the program would be entity that first delivers electricity into a participating jurisdiction for consumption in that jurisdiction. The Commerce Clause implications on such an approach have yet to be tested. 

            Allowances under the cap and trade program are proposed to be distributed for climate related purposes. Among the purposes that have been identified by the Advisory Group are: 

  • accelerating transformational investments; 
  • mitigating transitional adverse impacts of the program; and
  • addressing harmful impacts due to climate change.

Individual states would be called upon to make a determination as to whether allowances would be auctioned or allocated for free. 

            Offsets would be encouraged under the draft recommendations for entities not covered by the cap and trade program. The Advisory Committee has yet to determine how much of the cap could be met by offsets, although a range of 10-50% are being considered. The final value would be set once economic modeling data becomes available. Initially, offsets would be limited to those which occur within the states and provinces that elect to participate in the program. 

            Beyond the cap and trade program, the recommendations contemplate the development of complimentary measures that would reduce greenhouse gas emissions. These complimentary measures include, among other things:

  • energy efficiency; 
  • low carbon fuels; 
  • management of vehicle miles; 
  • biomass;
  • renewable electricity; 
  • transmission planning and siting; and
  • carbon capture and storage. 

These potential policies are now being evaluated with economic modeling. The Advisory Group received a report this week on the results of the modeling of the base or reference case. Efforts will not turn to modeling policy cases. It is anticipated that the policy cases to be modeled will include: 

·        the cap and trade program alone;  

·        the complimentary measures alone; and

·        the combination of the cap and trade program and complimentary measures. 

It is anticipated that the results of this modeling will be available by the time the Advisory Group meets in March at a date and location that have not yet been determined. 

Final recommendations are expected to be issued during the third quarter of 2009. 

For more information regarding these activities, visit www.midwesternaccord.org.

Tags: Climate

Climate | Energy

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