United States’ third regional climate change initiative calls for cap-and-trade system complementing local manufacturing and agriculture.

On November 15, 2007, the governors of Illinois, Iowa, Kansas, Michigan, Minnesota and Wisconsin, and the premier of the Canadian Province of Manitoba signed an accord that formed the United States’ third regional initiative directed at risks posed by climate change. Like the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and the Western Climate Initiative (WCI) in the West, the Midwestern Greenhouse Gas Reduction Accord (the Midwest Accord) calls for the creation of a regional cap-and-trade system for greenhouse gas emissions that will be based roughly on the successful program executed at the federal level to address the problem of acid rain nearly two decades ago.

Unlike the other two regional climate programs currently in development, however, the Midwest Accord also aims to complement the historic strengths of the region’s manufacturing and agricultural economy through a range of potential incentives for the research and development of new “green” technologies and sustainable domestic biofuels. Currently, three additional states—Indiana, Ohio and South Dakota—are acting as observers of the Midwest Accord.

As Congress continues to debate a federal climate change solution, the Midwest Accord, along with the RGGI, the WCI and the U.S. Conference of Mayors, is further evidence of the leadership and importance of local, state and regional environmental initiatives and regulation.

The Midwest Accord Action Items

The Midwest Accord is centered upon a cap-and-trade system for greenhouse gases. As with other market-based environmental programs, including several proposals currently under consideration in Congress, the cap-and-trade system proposed under the Midwest Accord would prohibit most greenhouse gas emissions unless the source obtains an adequate number of emissions allowances. In particular, the Midwest Accord calls for the inclusion of several elements that are common to most climate change plans:

  • Greenhouse gas reduction targets should include targets for all six primary greenhouse gases, not just carbon dioxide.
  • Reductions should be achieved through a multi-sector cap-and-trade system, not a program that focuses on only one industry, such as electricity generation.
  • The cap-and-trade system that is developed should be compatible with other regional (and possibly federal) programs so that greenhouse gas sources can trade allowances and offsets with entities outside the Midwest.
  • If practicable, allowances and offsets should be recorded in a multi-jurisdictional climate registry.

Beyond Cap-and-Trade

In contrast to other U.S. regional climate change initiatives, the Midwest Accord also calls for a more fundamental “retooling” of the region’s economy, intending to capitalize on the growing need for sustainable and domestic “green” energy. In particular, the Midwest Accord outlines a range of new environmentally focused programs and incentives that are designed to build on the region’s manufacturing and agricultural base, including support for the following:

  • The development and implementation new wind energy production and transmission technology
  • The development, procurement and widespread use of new, more efficient biofuels, including ethanol and biodiesel
  • The development of new carbon sequestration facilities
  • The implementation of new “clean coal” technologies

A low-carbon energy transmission infrastructure that will provide a cost-effective way to supply the Midwest with sustainable and environmentally responsible energy The Midwest Accord claims that its focus on domestically produced “green” energy intends to protect the nation’s future energy security. As such, the Midwest Accord seeks to do more than merely mitigate the effect of climate change. In a statement published with the release of the Midwest Accord plans, Minnesota Governor Tim Pawlenty said that one goal of the Midwest Accord is to make the Midwest “the Saudi Arabia of renewable energy.” Midwestern states now are leading the nation in the development of renewable energy and energy efficiency programs. The Midwest Accord designers hope that by assisting the traditional Midwest manufacturing and agricultural base in going “green,” the Midwest Accord also will be good for business and the region’s economy.

Next Steps

Work on translating Midwest Accord’s aspirational goals into a functioning program has already begun. Under the terms of the agreement, participating states and provinces must form a working group by January 2008 to begin the process of drafting final and enforceable rules for the Midwest Accord. The working group will be required to establish tangible emissions limits and implementation plans in order to circulate draft final rules to the member states for review and comment by mid-November 2008. If the working group and the member states meet this ambitious timeline, the Midwestern greenhouse gas cap-and-trade system could be active as early as mid-2010.