On September 23, 2008, the Western Climate Initiative (WCI) released its Design Recommendations for the WCI Regional Cap-and-Trade Program. The WCI comprises seven western U.S. states and four Canadian provinces (Ontario, Quebec, Manitoba and British Columbia) that have undertaken to establish a regional cap-and-trade program for reducing greenhouse gas (GHG) emissions.

The Design Recommendations state that the first compliance period under this cap-and-trade regime will run from January 1, 2012 until December 31, 2014, setting limits on GHG emissions resulting from electricity production and importation, from fuel combustion at large industrial sources and from certain industrial processes.

The second compliance period will begin on January 1, 2015, at which time limits will also be placed on emissions resulting from the combustion of certain transportation fuels and from residential, commercial and industrial fuels not previously regulated. Before setting precise emissions limits, each WCI partner will be allocated emissions allowances, calculated with reference to the state’s or province’s population growth, economic activity, electricity consumption and other factors. WCI partners would have significant flexibility in distributing these allowances to regulated entities within their jurisdictions. The Design Recommendations also indicate that allowances will be transferable, allowing them to be traded between regulated entities and bought and sold on a secondary market. Regulated entities will also be permitted to buy a limited number of offset credits, which represent emissions that have been reduced by a project or entity not regulated under the WCI or any other cap-and-trade regime.

For further information on the WCI, please see Torys’ August 5, 2008 Climate Change Bulletin.