MGA Cap and Trade

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MGA Cap and Trade

• Overview of Cap and Trade and MGA Process
• www.midwesternaccord.org
• For KEC Ray Hammarlund

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Typical Components of Cap Trade

• Scope and Point of Regulation
• Emissions Measurement, Monitoring Reporting
• Setting the Cap
• Distributing Allowances
• Offsets
• Compliance Periods and Enforcement

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Committees for MGA

• Scope/Electricity (Nancy Jackson) (April 7-8)
  (June 2-3)
• Target Setting (Tom Gross) (April 8-9) (June 3-4)
• Modeling (April 27-28) (June 4-5)
• Allowances (April 28-29) (June 9-10)
• Offsets (Chuck Rice) (Ray Hammarlund-Chair)
  (April 29-30) (June 10-11)
• Full Advisory Group Meeting (June 23-24)
• Full Committee Conference Call (July 10)
• Model Rule (July 22) GHG Public Meeting

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What is Cap and Trade?

• Cap on total emissions from a defined set of
  sources
• Cap is divided into one-ton permits, or
  allowances, and are distributed into the market.
• All emission sources are required to hold
  allowances equal to their emissions.
• Trade allowances to assure most cost effective
  reductions.
• Sources will reduce as long as the cost of
  allowances is greater than the reduction.

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Scope First big question

• What sources are capped in the cap and trade
  protocol?
• Point Source - Easier
• Non-Point Source Difficult
• 100s, 1000s or millions?
• Which greenhouse gases are capped?
• Are they all in the same agreement or do you have
  separate protocols for each?

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EU Cap Trade

• Started with point sources such as coal plants
• Did not cap autos (large tax on petroleum in EU)
• Will begin to cap aircraft shortly
• Did not allow for offsets (agriculture and
  forestry)

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Point of Control Part of first question

• Upstream or downstream, that is the question
• Upstream farther away from the customer
• Petroleum in EU is regulated upstream at the
  point of refining or importation
• Downstream closer to the customer
• Coal in EU is regulated downstream at the point
  of generation (as opposed to upstream (i.e.
  extraction point ))
• Other points At wholesale or retail
• Hybrid system for different pollution sources

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Allowances The BIG question (that begets many
bigger questions)

• How many allowances to allocate?
• What entity does the allocation?
• Do you give away or sell at a market price?
• Do you do a combination of free and saleable
  credits?
• How do you set the initial price?
• What do you do with the revenue?

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Offsets Another Question

• What are offsets?
• A project-based reduction that is demonstrated
  outside the capped sector.
• Must be real, surplus (or additional),
  verifiable, permanent and enforceable (RSVP E)
• Typical offsets forest reclamation, agriculture
  soil sequestration, animal methane digestors.