WCI Elaborates on Offset Program Essentials

Molly Peters-Stanley on July 29, 2010 1 Comment

Earlier this year, critics were concerned about the replacement of regional emissions trading schemes with a weaker federal climate bill. Now it seems regional schemes may be the only game in town until the Senate again picks up the carbon cap mantle. It's against this backdrop that the Western Climate Initiative (WCI) laid bare the final design recommendations for its regional, broad-based cap-and-trade scheme - including the essential elements for an offset system.

According to the final Design for the WCI Regional Program, the economy-wide scheme will cover 90% of emissions in partner jurisdictions with a goal to reduce emissions 15% below 2005 levels over the next 10 years. Auctions will be open to any regional tracking system account holders, subject to purchase limits to dissuade market manipulation, and will features a floor price on emissions. The scheme allows for unlimited banking over multi-year compliance periods.

The WCI also issued its final recommendations for the program's offset system, which can account for up to 49% of WCI emissions reductions through 2020. The product of stakeholder sessions and draft papers past, these documents provide some much-awaited guidance for offset suppliers.

Many of the WCI's recommendations were carried over from previous drafts and so don't come as much surprise. Therefore, the following paragraphs summarize the WCI recommendations for its offset system that did not appear/were undecided in earlier drafts:

Offset definition: Offsets must meet WCI's criteria for reductions and removals that are real, additional, permanent, and verifiable. Significantly, WCI omits the language "avoided emissions" in its definition, stating that "avoided emissions" are not "real" reductions - and so are "inconsistent with the ISO."

Additionality: WCI admits that the most significant changes/additions can be found in its additionality criterion. As was stated in previous drafts, WCI jurisdictions will adhere to performance standards to set baselines for determining additionality (instead of project-based additionality).

WCI aims for the most conservative baselines possible to guarantee that projects go beyond business as usual. To accomplish this, WCI will identify the most stringent regulatory and legal requirements found in any of its jurisdictions - and measure baselines against those requirements.

This kind of program-wide performance standard is intended to "level the playing field" for jurisdictions that would otherwise have incentive to weaken regional regulations and qualify more offset projects.

At the same time, regional differences between jurisdictions might make it difficult to apply the performance standard - in this case, WCI Partners can suggest alternative protocols.

WCI also retains the option to use what it terms "proportional additionality" to determine performance standards for agriculture and forestry sequestration. WCI proposes to assesses sector activity across a region (a jurisdiction or WCI as a whole) and measure change in a project's carbon stocks against this sectoral baseline.

A hypothetical example of how this works: if 10% of farmers already plant switchgrass for soil carbon sequestration, then the first 10% of carbon sequestered by switchgrass planting is not additional. Similar approaches have been used in other programs like EPA Climate Leaders.

Eligibility date: The eligibility date was one of the more contentious issues surrounding the offset system, with some environmental groups agitating for a later date and others suggesting project eligibility dates as early as 2001.

In previous drafts, WCI set the project eligibility start date at September 23, 2008. The final recommendation, however, is January 1, 2007 - the year when WCI was established. WCI hopes this project eligibility date will better capture those projects that were developed in response to WCI incentives.

Crediting period: Earlier drafts of the offset system suggested crediting periods of 10 years for non-sequestration projects. For sequestration projects, crediting periods are specified by protocol with a maximum crediting period of 25 years.

While these criteria remain unchanged, the WCI responded to stakeholder suggestions and lifted its limit on the number of renewals for non-sequestration projects. It also specifies that the crediting period for sequestration projects, including all renewals, cannot exceed 100 years.

Permanence: The WCI's final recommendations are more specific about the consequences of reversing emissions reductions (ie re-releasing carbon into the atmosphere after a project was credited for reductions). Based on the amount of emissions reductions reversed, the project developer will be required to "replace" these lost reductions with program allowances or surrender an appropriate number of the project's unsold certificates or offsets.

WCI also responded to stakeholders who were concerned about the 100-year standard for assessing permanence by providing for possible future review of the standard. Temporary and short-term crediting suggestions, however, didn't make the cut.

Validation: Some stakeholders, ah, validated the importance of third-party validation while others saw the process as unnecessary. Accounting for these mixed reviews, WCI will require that projects undergo validation prior to project registration, giving Partners the flexibility to validate projects itself or require independent third-party validation.