Western Climate Initiative or Mid-Canada Initiative?

The Western Climate Initiative is scheduled to begin its cap-and-trade program in 2012.  But as ClimateWire highlighted today, the number of states who will be ready and willing to participate in the program is quickly dwindling.  Utah is the latest member of the seven-state, four-Canadian-province agreement to announce that it will not have the state authority needed to actually implement a cap-and-trade program in 2012.  Montana, Washington and Oregon will also probably miss the 2012 start date, and Arizona’s governor withdrew from the cap-and-trade program entirely in February.   Meanwhile, New Mexico’s implementation of regulations may be derailed by a lawsuit from utility and oil and gas companies which contends that the state Environmental Improvement Board cannot regulate greenhouse gases without setting ambient air quality standards.

This leaves only California, British Columbia, Manitoba, Ontario and Quebec as the original members of the agreement who may be on track to take part as planned.   But even California’s ability to participate in 2012 might face challenges — as ClimateWire noted on Monday, a ballot initiative set for November would cancel the state’s authorizing statute, A.B. 32, until the unemployment rate falls.

Although California and the Canadian provinces account for 70% of the region’s emissions, and WCI is working on a plan to allow other states to join the cap-and-trade program in subsequent years, these defections may cause significant issues for the Initiative.  One important issue to iron out for California’s participation is which jurisdiction controls the allowances that cover electricity imports.  Under the WCI framework, electricity imports from outside of the region are counted as part of the cap in the jurisdiction where they are used, but generation originating inside the region is assigned to the generating facility.  This could create a large problem for California, which imports nearly half of its electricity from neighboring states.

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