1. Overview of Western Climate Initiative WESTAR Fall Meeting October 2008

2. 2

3. Initiative Collaboration Includes Joint work to: –Promote clean and renewable energy in the region –Increase energy efficiency –Advocate for regional and national climate policies that are in the interest of western states –Identify measures to adapt to climate change impact Three specific directives: –Set a regional emissions reduction goal –Join a multi-state registry to track, manage and credit reductions –Design a regional multi-sector market-based mechanism 3

4. WCI Design Most expansive cap and trade program to date –All 6 primary greenhouse gases from all major sources –Nearly 90% of the region’s emissions by 2015 Regional Greenhouse Gas Initiative (RGGI) – CO2 from electricity only – ~28% of emissions EU ETS –C02 from electricity, industrial combustion and process emissions –~40% of emissions 4

5. Economic Modeling Results Possible to meet regional goal with modest overall savings Complementary policies get us about ½ way to target –CA tailpipe standards –1% reduction in demand for electricity and gas –2% reduction in VMT Offsets, banking and broad scope all reduce allowance prices 5

6. What the Design Is and Isn’t It is –the policy framework –what must be the same between jurisdictions for this regional program It isn’t –the specific details; they will come through legislative and rule processes 6

7. Design Starting Point 7 Firm 2020 emissions limit –Based on individual State and Provincial emissions goals Common approach to quantifying emissions Individual State/Provincial programs –Harmonized around essential elements –Linked to create a regional trading market

8. Design Recommendations 8 Starting dates –2011 for reporting –2012 for cap and trade program Sectors, gases and thresholds Points of regulation Methodology for regional caps and partner budgets Three year compliance periods

9. Design Recommendations 9 Unlimited banking; no borrowing Essential reporting requirements Early reductions allowances (ERA) Offset criteria and protocols Maximum level of offset credits Regional auction process Minimum auction levels

10. Design Recommendations 10 Allowance over-allocation minimized Use of allowance values Enforcement Linkage to other systems Acceptance of new partners Regional administrative organization

11. State and Provincial Decisions Allocation of allowances –May standardize between sectors/jurisdictions Maximum percent of allowances auctioned Use of most of the value of the allowances Minimum offset credits allowed Allowance set-asides Recognition of early reductions (other than ERA) 11

12. Path Forward Develop legislation 2009 session Meeting with stakeholders and legislators Develop 2009 work plan, including Early Reduction Allowance criteria Offset protocols and project types Regional caps and partner budgets Reporting essential elements and model rule Auction design Essential elements for cap and trade rules Regional organization design 12

13. What it means for Air programs Quantification of emissions critical –Establishing regional caps –Setting partner budgets –Measuring reductions –Reporting across jurisdictions –Market confidence Market requires consistency, transparency, enforcement –Accurate and timely allowance tracking –True up after compliance period –Quick and sure enforcement And, likely yours to implement 13

14. www.ecy.wa.gov/climatechange/index.html