The Western Climate Initiative (WCI) is expected to release a report on Tuesday detailing the design of a regional cap-and-trade program for carbon emissions.  The WCI is a consortium of 7 Western states and 4 Canadian provinces that have committed to reducing greenhouse gas (GHG) emissions by 15 percent (from 2005 levels) by 2020.

The WCI is the second major regional GHG reduction program to attempt to implement a cap-and-trade program.  The first program, the Regional Greenhouse Gas Initiative (RGGI), composed of 10 states on the East Coast, will hold its first auction on Thursday and begin operations in January 2009.

The WCI is expected to be the broadest GHG reduction program in the US to date.  While RGGI only covers carbon dioxide emissions from the electricity generating sector, WCI will regulate emissions from all six major GHGs, and include emissions from large industrial and commercial facilities, as well as petroleum fuels.

This broader scope means that the program could have significantly larger economic impacts on regulated facilities within the participating states, given that many more entities will be required to purchase emissions allowances to cover their GHG emissions.  It also means, however, that the participating states will have a greater opportunity to reduce their emissions footprint, as compared with states participating in the more limited RGGI program.  As a result, WCI has greater potential to serve as a model for comprehensive, nationwide GHG reduction mandates.

Details of the program have been kept under wraps, but are expected to follow the basic plan outlined in the July design draft.  The most significant issue that is expected to be covered in Tuesday’s release is the apportionment of allowances to each participating state.  Once given their allowance quotas, the individual states will determine how to distribute them to regulated facilities (e.g., auctioning vs. giving away).

WCI’s cap-and-trade program is expected to begin operations in January 2012, though regulated entities will have to begin monitoring and reporting their emissions in 2010.

For further information about this topic, please contact Akin Gump.