WRAP – MTF Meeting May 21, 2002 Salt Lake City, Utah Market Program Issues WRAP – MTF Meeting May 21, 2002 Salt Lake City, Utah

Overview Key elements of the trading program Allocations Issues Trading Issues Integration with National Programs Next Steps

Five Critical Elements Measurement: Quantify emissions accurately. Transparency: Make reporting and program operation public. Accountability: Hold program participants accountable for meeting goals. Fungibility: Minimize transaction constraints Consistency: Apply fixed rules consistently and objectively. Market Mechanisms and Global Climate Change – An Analysis of Policy Instruments, Petsonk, Dudek, & Goffman, October 1998

Allocations Issues Sector allocation based on sector subtotal of the milestones Credits should be allocated to emissions sources (I.e. no auction) Uncertainty and new source set-aside in milestones should be allocated to utility/non-utility sectors on a pro-rata basis. Other States opting-in – Need a transparent process to develop allocations for their sources. Non-banked allocations will aggregate to M/S each year.

Allocations to New Sources Growth allowance Available on a 1st come, 1st serve basis. Allocated on a BACT emissions rate or .1 lbs/mmBTU where appropriate BACT analysis not available Allowances return to growth pool when not used after a defined amount of time (in the event source not built.)

Trading Existing Market Infrastructure should be used – ATS/ETS Market needs to be allowed to work Participants need assurance of value of allowance – (e.g. Current RAVI allows FLMs to capture allowances with uncertain and ambiguous criteria.

Trading (con’t.) Banking No restrictions No expiration (inc. 2018)

Non-utilities Opt-in, in order to participate in regional market: Similar transparency as utilities Monitoring  CEM’s. Emission Control level Realistically set, creates some market value Clear understanding on how it is set.

Integration with National Programs WRAP Trading program incorporated into national program – design should reflect this. Existing ATS/ETS should be used. National Trading should be permitted

Next Steps Determine what needs to be included in 2003 SIPs for Regional Market Program. Non-utilities? Develop timelines