Sayeh Tavangar 1 day ago
Electric Power Daily (31-Oct-11)
A trio of Canadian provinces is on track to form a regional greenhouse gas cap-and-trade market with California, the deputy secretary of the California Environmental Protection Agency said Friday.
British Columbia, Ontario and Quebec are moving forward with implementing cap-and-trade programs that can be linked together to create a single carbon dioxide market, Michael Gibbs, deputy secretary for climate change at the California EPA, said at an emissions trading conference in Los Angeles.
"There have been lots of discussions about the benefits of creating a larger set of linked programs," such as greater emissions reductions and greater geographic diversity, he said.
Jeff King, managing director of environmental markets at Scotia Bank, said he too was "bullish" on the provinces forming a regional cap-and-trade market with California.
However, other partners in the Western Climate Initiative are not expected to join anytime soon, Gibbs said.
The WCI consists of six states, Arizona, California, Montana, Oregon, Utah and Washington, as well as four Canadian provinces, British Columbia, Manitoba, Ontario and Quebec.
In October, California finalized its cap-and-trade regulations. The cap covers power plants and industrial sources beginning in 2013, and then expands two years later to transportation fuels and distributors of natural gas.
Linkage will require harmonizing cap-and-trade programs with other jurisdictions, Gibbs said. This means coordinating rules to ensure the consistent design of various aspects, like auction allowance methodology, rules on holding limits and penalty levels for non-compliance.
The California Air Resources Board, which is responsible for writing the cap-and-trade rules, left a placeholder in the regulations regarding linkage. The board has said it plans on examining the issue in 2012 to determine which areas of the regulations need to be tweaked to guarantee consistency across borders.
One area of the regulations that will not be further considered is a provision placing the burden for replacing an invalidated offset credit upon the buyer, Gibbs said.
Offsets are one of two compliance instruments that entities may use to cover GHG emissions. California's cap-and-trade rules place an 8% cap on their usage.
The offset buyer liability has generated considerable criticism from offset project developers, emissions traders and compliance entities. They contend that the current rules will impede the trading of offset credits and slow the development of eligible projects, thus raising compliance costs.
Gibbs acknowledged that the buyer-liability language was "the single most controversial" area of the regulations. But he said discussions with officials from British Columbia, Ontario and Quebec led the group to conclude that offset liability was one area where differences would be tolerable.
"At this point, we believe that we can coexist with one jurisdiction doing it one way, and another jurisdiction doing it another way, by ensuring that all the jurisdictions manage the steps necessary to respond in the event an offset is found to be inadequately documented," Gibbs said.
Geoffrey Craig
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