Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI)

1. Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI) Ray Hammarlund, Director of KCC Energy Programs Division

2. RGGI

3. RGGI - Scope • CO2 specific • Caps on all electric generators over 25MW • Units this size comprise 95% of CO2 emissions from the electric generation sector • Eligible (determined by individual states regulatory agency) biomass co-firing “may” be deducted from the compliance obligation

4. Targets Set • Stabilize power sector CO2 emissions over the first six years (2009-2014) at roughly equal to current emissions. • Emissions decline set for 2.5% per year for the four years of 2015 to 2018. • Total regional CO2 budget of 188,076,976 tons

5. Allowances • States will sell “a significant amount or all allowances” through a regional auction or otherwise. • States have agreed to allocate a minimum of 25% of revenues to consumer benefits programs. • States may choose how to allocate the remaining 75%. • NY, MA, VT, RI, CT and VT all publicly stated their commitment to use all revenues for consumer benefits programs.

6. Temporal Flexibility Mechanisms • Banking • Extended Compliance Period • Early Reduction Allowances

7. Price Ceiling on Allowances • Stage One – if 12 month rolling average exceeds $7 (discounted to 2005 dollars according to CPI), CO2 offsets will be expanded from 3.3% to 5% of compliance obligation (more on this in offsets) • Stage Two – if 12 month rolling average exceeds $10 (discounted to 2005 dollars according to CPI), CO2 offset allowances will expand to 10% of compliance obligation OR compliance period will be extended to four years AND CO2 offset allowances may be awarded for permanent retirement of greenhouse gas allowances or credits.

8. Offsets • Maximum of 3.3% of total compliance, expanded for 5% and 10% if stage one and two are met, respectively • Five categories are eligible: • Landfill methane capture and destruction • Reduction in emissions of sulfur hexafluoride (SF6) • Sequestration of carbon due to afforestation • Reduction or avoidance of CO2 emissions from natural gas, oil or propane end-use in the building sector due to end-use energy efficiency • Avoided methane emissions from agricultural manure management operations

9. Western Climate Initiative • Work in process-Agreement on program design by August 2008 is the target. • Regional Emissions Reduction Goal – 15% below 2005 levels by 2020 • Point of Regulation – Generator Based (downstream) • Regulates all six greenhouse gasses as a CO2 equivalent reporting basis

10. Western Climate Initiative

11. Allocation • Each Partner will auction a minimum percentage between 25% and 75% of its allowance budget through a coordinated regional auction process by which each Partner will auction allowances throughout the WCI region and receive the proceeds of the auction.

12. Banking and Borrowing of Allowances • Banking is allowed • Borrowing is not • No word on how proceeds may or will be spent

13. Offsets • None determined yet. August 2008 is the deadline.