Tag: Climate Action Secretariat

On October 22, 2010, the BC Ministry of Environment (MOE) released consultation papers for the Emissions Trading Regulation and the Cap and Trade Offsets Regulation. The proposed regulations will provide the foundation for the province’s proposed cap-and-trade system under the Western Climate Initiative (WCI), which has a planned start date of January 1, 2012. MOE is seeking comments from stakeholders, First Nations and the general public on the two proposed regulations until December 6, 2010. The proposed regulations are anticipated to be finalized in early 2011.

The proposed Emissions Trading Regulation is designed to establish an efficient, fair market for trading cap-and-trade compliance units. Under the proposed Emissions Trading Regulation, operations that meet certain criteria will be considered a “Regulated Operation”.

The following provisions are under consideration:

• starting January 1, 2012 (or any subsequent year in which an operation emits 25,000 tonnes or more of CO₂e), the regulation will apply to the operator of an operation that emits 25,000 tonnes or more of CO₂e;
• source types listed in Schedule A of the current Reporting Regulation (including activities such as general stationary combustion, aluminum production, cement production, coal mining, industrial wastewater processing, lime manufacturing, petroleum refining, and pulp and paper production) are under evaluation to be “covered sources” in the first compliance period;
• additional sources types under consideration include emissions from anaerobic or aerobic digestion of wastewater, emissions from surface coal mines and stored coal piles, specific oil and gas and petroleum refinery emissions, and fugitive hydrofluorocarbon emissions  from cooling units at electricity generators;
• verified emission reports and compliance unit liability may be linked in the registry, meaning that an amount equal to a Regulated Operation’s annual greenhouse gas (“GHG”) emissions will become its corresponding compliance obligation;
• facilities below the 25,000 tonne threshold may be able to opt in to the emissions trading system;
• each compliance period will last three years;
• at the end of each three-year compliance period, one compliance unit will be retired for each tonne of GHG emissions;
• every three years, BC will prepare a nine-year “Allowance Budget Forecast”, with the first forecast for the period from 2012 to 2020 being published in the first quarter of 2011 (in 2014, BC would release a forecast for the period from 2015 to 2023);
• every three years, BC would establish a cap on allowances issued for the following three-year compliance period, known as an “Allowance Budget”;
• in the third quarter of 2011 and every year thereafter, BC would publish an annual “Allowance Distribution Plan” that will describe how allowances will be allocated for the following year (including number of allowances to be auctioned, number of allowances to be distributed for free, number of allowances to be held in reserve or contingency accounts, and number of allowances to be sold directly in the market);
• there will be two main allowance distribution mechanisms for distributing allowances to a Regulated Operation: by auction and by distribution for free;
• auctions of allowances will be held quarterly in coordination with other WCI members on a single round, sealed-bid, uniform price basis;
• BC will have the ability to set a minimum price for allowances sold at auction;
• allowances allocated for free will be transferred into accounts at the beginning of each year;
• a registry will be established to record the issuance, holding, transfer, retirement and cancellation of compliance units;
• BC may collaborate on a registry with other WCI members;
• compliance will be assessed every three years on July 1 of the year following the last year of the compliance period;
• a number of compliance mechanisms will be available to Regulated Operations including limited use of offsets and approved compliance units from other systems, unlimited banking, multi-year compliance period, linking with partner jurisdictions, and government support for low-carbon policies and programs;
• BC will set limits on the use of offsets as a percentage of an operator’s compliance obligation and is still seeking input about the percentage to be adopted in BC;
• penalty for non-compliance will be assessed at three additional allowances for every allowance that the regulated operation is short; and

The proposed Offsets Regulation will govern emission offsets and set out steps for offset registration, validation, monitoring, quantification, reporting, verification, certification and issuance. It is expected that offsets issued in BC will be able to be traded and used for compliance across the WCI.  The following provisions are under consideration:

• offset project eligibility will be evaluated on the basis of the following criteria: definition of an offset, real, additional, permanent and verifiable;
• a BC offset, of “emission reduction unit” (“ERU”), would be issued based on certification of verified emission reductions from a registered offset project (one ERU will represent a reduction or removal of one tonne of CO₂e);
• ERUs would be issued for projects located within BC and may also be issued for projects located outside of BC in a partner jurisdiction (Recognized Compliance Units, or RCUs, are compliance units that will be recognized by BC under the Cap and Trade Act but not issued by/in British Columbia.;
• ERUs would only be issued for projects that have a start date of January 1, 2007 or later (2007 was the year in which the WCI Memorandum of Understanding was signed);
• BC government will carry out periodic risk-based auditing.

The consultation papers for the proposed Cap and Trade Offsets Regulation and Emissions Trading Regulation are available online.