Development of WCI Offset Protocols

Western Climate Initiative

Development of WCI Offset Protocols The Western Climate Initiative (WCI) Partner jurisdictions will be reviewing offset protocols to support the WCI cap-and-trade program. In a series of design documents released over the last several years, WCI recommended the creation of rigorous and consistent offset protocols, and processes for reviewing and developing offset protocols in an open and transparent way. WCI Partners will begin the review and evaluation of the protocols listed below. Offset Protocols for WCI Review Avoided CH4 from Manure Management (cows and pigs) Ozone Depleting Substances Coal Mine Methane Small Landfills WCI may also consider reviewing additional protocols relating to municipal and industrial waste water treatment, forests (all project types), fertilizer application N2O emission reductions, rice cultivation, and enteric fermentation. Important Note: The WCI Partner review of these protocols, or any others, does not constitute an endorsement or approval of these protocols, or any existing credits issued under those protocols, as being eligible for use in any WCI jurisdiction program.

Why Investors Should Be Paying Attention To California's Carbon Auction

After numerous attempts to stop its cap-and-trade law (AB32), and more than one delay of the law’s implementation, California is finally preparing for its first carbon auction. The results of that auction–there will be a “practice” auction in August, with the first real auction scheduled for November–are likely to determine the fate of carbon regulation in the United States and, perhaps more importantly, the value placed on carbon in the U.S. marketplace.

Under AB32 the state will dole out so-called carbon allocations to utilities and various other carbon-emitting companies. The number of allocations distributed will be based on the amount of carbon or carbon equivalent (a ton of methane, for example, is equal to 23 tons carbon) emitted in 2012. Investor-owned utilities are required to sell their allocations into the market and use the money to benefit ratepayers, while other utilities and companies can opt to either use or sell their allocations. A utility that’s given 10 allocations, equivalent to 10 tons of carbon emissions, but has made efficiency improvements and only emits eight tons of carbon or carbon equivalent, can sell its remaining allocations. Any un-used or un-sold allocations expire at the end of the auction’s initial two-year period. The price floor set for carbon in the auction is $10 per ton, but many are predicting that the price will level out at $15 per ton. The Governor’s office is predicting revenue of at least $1 billion from the initial auction.

Over time, the number of companies included in the cap-and-trade program, and the auctions, will increase, and the number of allocations allotted will be driven down, necessitating further emissions reductions and/or the purchase of more allocations on the market. Some companies and utilities will be looking to buy advance allocations as well–these are allocations priced at today’s market rate, but which cannot be used until 2015. Those companies that know they will need to buy more allocations and want to lock in today’s carbon price may opt to stockpile advance allocations. This could be particularly true not just for more expected players, such as utilities, but also for the high-tech sector, where emissions of sulfur hexafluoride (SF6), which is used widely in the semiconductor industry, could prove to be quite expensive. SF6 has a carbon equivalent of 23, 900, so even emitting a relatively low amount of the stuff could have a major impact on a company’s bottom line.

Move up Move down

There is one remaining political squabble: Under California’s Proposition 13, anything that could reasonably be described as a tax must be approved by two-thirds of voters. AB32 was passed by voters, and Proposition 123, which aimed to kill AB32, was voted down by 62 percent of the state’s voters, but it did not get two-thirds of voters’ approval. That means any money raised by the bill will need to be tied directly to greenhouse gas reductions or else risk being frozen by opponents to cap and trade. While some of the Governor’s initial plans to use the auction revenue to help fund high-speed rail may pass muster, others–namely using the funds to beef up the state’s ailing General Fund–would certainly not.

Irrespective of what happens with the auction’s revenues, however, California is likely to set the stage for federal carbon regulation, no matter who wins the next election or which party controls Congress. “California has put into place the first real market system that lashes the markets to climate change solutions,” says Larry Goldenhersh, CEO of environmental ERP software provider Enviance, which is working with companies such as Valero, Chevron, and PG&E to prepare for the shift in California. ”The results will determine whether we have federal cap and trade in the next five years. It doesn’t matter who’s elected.”

That’s true whether the auction and the cap-and-trade program exceed all expectations or fail spectacularly. Current revenue projections are based on the assumption that most, if not all, of the allocations that are auctioned off will sell, but there’s no guarantee that will happen. Should cap and trade flop in California, federal regulators will nonetheless learn from the experiment, and either work toward a revised cap-and-trade idea or revive the notion of a carbon tax.

“There’s been a whole raft of greenhouse gas emissions regulations passed in the last few years and if Obama is elected I think we can expect to see the drumbeat of ever-increasing greenhouse gas regulatory pressure continue,” Goldenhersh says. “By mid-term, industry will demand a national solution that puts a market solution in place. If you were to poll utilities right now, I think you would find that most of them want a price on carbon so that they can pass it on to their rate payers and make a financial plan around this stuff.”

The California experiment will have an impact if Romney is elected, as well, according to Goldenhersh. “If Romney wins I think you’ll see a reluctance to reverse any of the greenhouse gas regulations already in place,” he says. “If you research Governor Romney, yes he said recently that the EPA is out of control and appears to be a tool to crush private enterprise, but he also launched greenhouse gas legislation in Massachusetts, which set a short term goal of reducing greenhouse gases to 1990 levels by 2010 and which  he labeled as  the ‘no regrets policy towards climate change.’ He is also on record as saying mankind has contributed to climate change and we need to do something about it. Romney is conflicted on climate.”

Either way, with many U.S. companies already dealing with a price on carbon in California, plus a patchwork of federal greenhouse gas regulations, Goldenhersh is hearing from his customers that they want some sort of federal, market-based solution. “When Congress gets pushed for a solution, what will they be looking at? They’ll be looking at the way the 8^th largest economy in the world has managed this issue. And I think that will accelerate the development of a federal carbon market.”

That’s good news for data management companies like Enviance (and others, such as SAP and OsiSoft), which will be tapped to help companies track and analyze their emissions. Back in 2005, Enviance helped American Electric Power build the world’s first cloud-based system for managing greenhouse gas emissions. At the time, AEP was reputed to be the largest CO2 emitter on earth. The Enviance system enabled AEP executives to see the greenhouse gas emissions attributable to every  ton of coal burned at any of their plants, and helped them begin to size the impact greenhouse gas regulation would have on their business.

“Tracking emissions is the first step toward figuring out how much it will cost you when you have to start paying for carbon,” Goldenhersh says. “It gives your CFO information like at $10/ton we will have $350 million in carbon  exposure by 2013, so what do we do about that?”

http://www.forbes.com/sites/amywestervelt/2012/05/14/why-investors-should-be-paying-attention-to-californias-carbon-auction/#comment_reply

Report on the Inaugural Meeting of the Climate and Clean Air Coalition

The Climate and Clean Air Coalition (CCAC), a group of countries organized to address the short-lived climate pollutants of HFCs, black carbon, and methane, held its inaugural meeting April 23 and 24 in Stockholm, Sweden. The initiative was announced by Secretary of State Hillary Clinton in February. 

Since the announcement of the CCAC, Colombia, Japan, Nigeria, Norway, the European Commission, and the World Bank, have joined the inaugural members: the United States, Canada, Bangladesh, Ghana, Mexico, Sweden, and the UN Environment Programme.  Several other countries, Australia, Denmark, Finland, the Republic of Korea and the United Kingdom, were also present as interested observers that may become full partners. 

At the meeting, the parties discussed 12-16 proposals for action across a number of initiatives in multiple focus areas.  Of those proposals, they narrowed the list down to five areas of policy that they intend to initially work upon: 

·      HFCs - Accelerating alternatives to HFCs.

·      Diesel emissions - Fast action on diesel emissions including from heavy-duty vehicles and engines.

·      Brick Kilns - Upgrading old inefficient brick kilns that are a significant source of black carbon emissions.

·      Landfill Methane - Accelerating the reduction of methane emissions from landfills.

·      Oil and Gas Methane - Speeding up cuts in methane and other emissions from the oil and gas industry. 

The Alliance was the only true representative of the private sector that attended the meeting, which was open to invited observers through much of the first day but subsequently closed.  Though the CCAC’s press release noted the presence of “delegates from the private sector” aside from Kevin Fay the only observers were a representative from the Stockholm Environment Institute, a representative the International Council on Clean Transportation, and Durwood Zaelke, from the Institute for Governance and Sustainable Development. 

Furthermore, in discussion with EPA it appears there is scant evidence that the sectors targeted by these initiatives have been fully engaged with the proposals that were presented at the meeting, or in current plans about a path forward for those proposals.  This is particularly concerning because, while participation in CCAC is voluntary for any country, the proposals under discussion could ultimately include mandatory regulatory initiatives.  Therefore, while voluntary for countries to participate, the initiatives will not necessarily be voluntary for affected industries once agreed to by the group. 

It also appears that there has been little definitive thought invested as to how CCAC will interact with many of the other international forums addressing climate such as the UNFCCC, the Major Economies Forum, and the G-20, or to the Montreal Protocol in the case of HFCs.  There is a possibility that the coalition will have a side-event at the Rio +20 meeting in Brazil in June, but it is not expected to dwell on the specifics of any of the five initiatives. 

A second meeting of the CCAC will be held in Paris during July at a date to be determined. 

Attached is a draft of the concept paper developed by the United States on the HFC initiative.  As you will note, it focuses on “promot(ing) climate-friendly, cost-effective alternatives and technologies for new and existing equipment; minimize(ing) HFC leaks through responsible management; and encourage(ment of) recovery, recycling, reclamation, and eventual destruction of existing HFC supplies.” 

During the discussion in Stockholm, the World Bank asked if this could also be expanded to include CFC destruction as a component.  The United States replied that it would welcome consideration of that as part of the initiative.

The US was designated to take the lead on the HFC initiative.  It will be recalled that EPA and State Department representatives had presented this as a means to promote the North American amendment proposal, however, the paper does not address this nor was it discussed during the meeting.  Representatives from EPA and the State Department will be invited to a future Alliance Board meeting to discuss their plans for this initiative.

The partnership contemplates a Secretariat operating out of the UNEP IE office in Paris.  Current partners have pledged $18 million to date, including $12 million from the United States towards the secretariat and to get the partnership operational.

The summary statement from the Ministerial portion of the meeting is also enclosed.

Dave Stirpe
Executive Director
Alliance for Responsible Atmospheric Policy
2111 Wilson Blvd., 8th Floor
Arlington, VA 22201

phone: (703) 243-0344
website: www.arap.org

California carbon down 3 pct ahead of electricity meeting

* Trading down 63 percent from previous week
* Traders await insight on electricity import rules
SAN FRANCISCO May 3 (Reuters Point Carbon) - California carbon allowances (CCAs) for delivery in 2013 closed at $15.50/tonne on Thursday, down 50 cents from a week ago, as market players held back on trading ahead of a key regulatory meeting on Friday that they hope will give new market players more clarity about their obligation in the cap-and-trade scheme.

Just 30,000 CCAs changed hands on the IntercontinentalExchange (ICE) this week, a 63 percent drop from the previous week.

Sources said the market was quiet in the run up to the California Air Resources Board's (ARB) workshop in Sacramento that will focus on regulations pertaining to electricity importers.
Under California's "first deliverers" system, the first entity that sells power to the California grid, ranging from power producers to banks, has to hold allowances to cover the related greenhouse gas emissions.

California imports about a quarter of its electricity from out of state, which tends to come from more carbon-intensive sources like coal plants and accounts for about 50 percent of California power-sector emissions.

At this point, the CCA market moves more on regulatory developments than supply-and-demand fundamentals, so brokers and traders said they'll be watching the meeting carefully to see if it might entice new entities to engage with the market.

"The hearing could definitely have an impact on the market because a lot of market maker-type entities, like banks, own a lot of the PPAs (power purchase agreements) for out-of-state generation in California," one broker said Tuesday.

"So if they get a little more clarification from ARB on what they are liable for from a compliance standpoint, they may begin to translate that into market activity," he said.

RESOURCE SHUFFLING
The workshop will also examine the controversial issue of "resource shuffling."

Resource shuffling is when an out-of-state power producer sends more of its clean electricity generation to California to make it appear that it has reduced its emissions while keeping its dirty generation in state.

California has indicated that since it would not provide any environmental benefit, resource shuffling will be banned by the program.

But lawyers have said it's unclear whether the state has the legal authority to enforce the ban, since California is prevented from regulating economic activity taking place in other states.

In its regulations, ARB requires power producers to swear an oath that they will not engage in the practice.

OFFSETS
Carbon offset credits derived from projects that destroy ozone-depleting substances (ODS), which will count for compliance with the program, were offered at $8.50/t on Thursday, sources said.
"There's not a lot of bid-side interest. We've heard indications of $7.50-$7.75/t, but nothing is significantly materializing there," one broker said.

He added that interest in the market for Climate Action Reserve Climate Reserve Tonnes (CRTs) is fading as market participants await the introduction of official ARB-issued credits, which the air regulator has not yet started minting.

On Thursday ARB announced it would begin accepting applications for companies wanting to serve as offset registries, verifiers and early action programs. (rory.carroll@thomsonreuters.com; Editing by Bob Burgdorfer)

California eyes dividends, deficit cuts from cap-and-trade

Feb 9 (Reuters) - Revenue raised by California's greenhouse-gas emissions trading program could be distributed to state residents to offset higher fuel costs or used to reduce the state's projected deficits, a state budget watchdog agency said on Thursday.

"Our analysis indicates that such revenues could be returned directly to Californians - such as in the form of a check - as a dividend that would be intended to offset their increased expenditures on goods and services that ultimately would become more expensive as a result of the cap-and-trade program," the Legislative Analyst's Office said in a report.

The report added that revenue from the program, which goes into effect next year, could also be used as part of a "multiyear approach to reduce the state's projected General Fund deficit."

"The availability of these revenues could allow the state to avoid other actions, such as cutting governmental programs or increasing state revenues, that could slow the state's economy," the report said.

The report comes as California prepares to implement its Global Warming Solutions Act enacted in 2006. Commonly referred to as AB 32, the law established the goal of reducing greenhouse gas emissions in the most populous U.S. state to 1990 levels by 2020.

To meet that target, California will establish a so-called cap-and-trade program that issues allowances to companies that emit carbon dioxide and other greenhouse gases at facilities such as power plants, refineries and factories and that permits the allowances to be traded.

Revenue from the program is expected to vary annually, from less than $1 billion to nearly $14 billion, according to the Legislative Analyst's Office.

Governor Jerry Brown's state budget plan expects the program to generate $1 billion in revenue in the next fiscal year, including $500 million that will be used to fill the state's general fund, which faces a $9.2 billion deficit.

Brown also wants to put cap-and-trade revenue toward other clean-energy, natural resources and other uses, including toward funding a planned statewide high-speed rail network. The Democratic governor put the idea of funding the rail project that way out recently during a television interview, catching lawmakers by surprise.

Legislators from both parties in the Democrat-led legislature have become increasingly concerned about the planned rail network, which is also under attack from Republicans the U.S. Congress and California's Central Valley, where the U.S. government is insisting the network's first line must be built to receive more than $3 billion federal funds.

At issue for California lawmakers are escalating cost projections for the rail project. Its latest estimated cost nears $100 billion, which eclipses its previous estimate of $43 billion as well as the $10 billion in general obligation debt voters approved in 2008 to help build the rail system.

Lawmakers are also concerned that voters are souring on the ambitious rail plan, which is intended to connect California's far-flung metropolitan areas. Nearly two-thirds of voters want lawmakers to put the bond package back on the ballot, and if given another vote on it, 59 percent would reject it, according to findings of Field Poll released in December.

Brown is enthusiastically behind the rail project. He met with U.S. Transportation Secretary Ray LaHood on Thursday and both men affirmed support for it.

After a tour on Wednesday of a Siemens plant in Sacramento, California where the company light-rail car, LaHood said the Obama administration stands behind putting the rail system's first line in the Central Valley to link the cities of Fresno and Bakersfield.

That idea is not going over well in California's legislature, drawing criticism from lawmakers from both parties. While the farming region's flat terrain may be suitable for running high-speed trains, many lawmakers would prefer to start lines in urban areas -- and many would prefer the state not start the project at all given its costs.

Brown's finance department is preparing a report on rail project that will help guide lawmakers in coming months to decide whether California should issue the first set of bonds to finance construction of the project's first leg. (Reporting By Jim Christie; Editing by Bernard Orr)

California cap-and-trade money should be spent carefully, analyst says

California's experiment in combating global warming by creating a cap-and-trade program could generate more than $12 billion a year in revenue, but officials can't rely on that windfall to fix the state's fiscal problems, according to a new report.

The nonpartisan Legislative Analyst's Office said the amount of money generated by auctions of credits allowing polluters to release greenhouse gases would vary wildly, from less than $1 billion to $14 billion in some years. The market-based system is intended to drive down the amount of greenhouse gases discharged in California by making it increasingly expensive to pollute.

Gov. Jerry Brown has his eyes on the first batch of cash, though his plans are still vague. He's suggested spending $1 billion of the money generated by the first auction, scheduled for August, on renewable energy development and infrastructure. He also wants to put about $500 million toward the state's general fund and has spoken about using future revenues to help finance a controversial high-speed rail line linking Los Angeles and the Bay Area.

Business groups contend that the money should be returned to companies who have to pay higher fees to meet California's new emissions requirements. The Air Resources Board, which designed the cap-and-trade program, has proposed returning the money to consumers to compensate them for possibly higher energy prices.

The legislative analyst's report raises red flags for Brown. It warns that the amount of money generated by the program will fluctuate wildly from year to year. "This means that they may be more appropriately used for one-time or short-term, purposes rather than for the support of ongoing programs or tax reductions," it states.

The report also cautioned that the state can only legally spend the money on easing the impact of greenhouse gases -- or muster a two-thirds vote of legislators to spend it elsewhere.
"Appropriate uses of the revenues for mitigation purposes could potentially include expenditures on energy and water-use efficiency programs, alternative fuel programs and investments in renewable energy projects," the report states.

Federal Court Blocks California Carbon Emissions Rule

Cheryl K. Chumley writes from Northern Virginia

A federal district court has put a temporary stop to a California Air Resources Board (CARB) rule restricting carbon dioxide emissions from transportation fuels. According to the court, the rule violates the U.S. Constitution’s Commerce Clause by discriminating against oil and biofuel producers located outside the state of California.

The court’s Dec. 29 decision did not take issue with CARB’s asserted authority to impose carbon dioxide restrictions and stringent reporting requirements. The decision requires CARB rules to avoid discriminating against fuel sources based on where they are produced.

‘A Belated Christmas Present’
“I, along with every single California consumer, was given a belated Christmas present when the Eastern District of California Federal Court placed a stay on the implementation and enforcement of California’s Low Carbon Fuel Standard,” said Tom Tanton, president of T2 & Associates, an energy technology firm, and a fellow in environmental studies at the Pacific Research Institute. “Potentially increasing fuel costs by 20 or 30 percent for no discernible benefit flies in the face of good government and environmental protection.”

Tanton also said it was “high time” the CARB was challenged on its members’ “roughshod” treatment of Californians.

Damaging California’s Economy
“Oil and gasoline are used in transportation vehicles precisely because they are less expensive than alternative fuel sources,” said Heartland Institute science director Jay Lehr. “Reducing carbon dioxide emissions by punishing inexpensive energy sources is only going to hurt California consumers. The court gave California consumers an economic break by halting the CARB Rule.”

“Oil and gasoline are also more dependable fuel sources than the proposed alternatives,” Lehr explained. “California has for years been trying to impose alternative fuel mandates on its consumers, but even the enormous power of the state has been unable to force such a transition. The state has done its best to create and encourage hydrogen highways, hybrid vehicles, electric plug-in vehicles, fuel-cell vehicles, etc., but where are the results from all these expensive programs? The results are merely been money sent down the drain.”

‘Facially Discriminatory’
Trevor Burrus, a legal associate with the Cato Institute’s Center for Constitutional Studies, said the court’s decision will likely withstand appellate court review.

“At the very least,” he said, “it will not be easily overturned.”

The in-state versus-out-of-state discrepancies involved in the California case provide solid cause for discrimination charges, Burrus says.

“As the court describes, the different treatment between out-of-state providers and identical in-state providers is facially discriminatory and thus must meet strict scrutiny, … the highest level of constitutional scrutiny,” he said. “In order to survive, a law must not only forward a compelling interest of the state, but it must be narrowly tailored to reach that goal.”

In other words, Burrus explained, “if there are other methods of accomplishing the goal that do not discriminate, then the law will fail.”