Summary of RGGI Model Rule Changes: February 2013

Transcription

1 Summary f RGGI Mdel Rule Changes: The Reginal Greenhuse Gas Initiative (RGGI) is cmpsed f individual CO2 Budget Trading Prgrams in each RGGI participating state. Each participating state s CO 2 Budget Trading Prgram is based n the 2008 RGGI Mdel Rule, which was develped t prvide guidance t states as they implemented the RGGI prgram. RGGI participating states have cmpleted a 2012 Prgram Review, which is a cmprehensive evaluatin f prgram successes, prgram impacts, the ptential fr additinal reductins, imprts and emissins leakage, and ffsets. Amendments t the Mdel Rule were develped by the RGGI state staff as part f the Prgram Review. This effrt was supprted by an extensive reginal stakehlder prcess that engaged the regulated cmmunity, envirnmental nn-prfits, and ther rganizatins with technical expertise in the design f cap-and-trade prgrams. A summary f the amendments t the RGGI Prgram, as utlined in the Mdel Rule, are discussed belw. Size and Structure f Cap and Allwance Apprtinment (XX-5.1) The Reginal Emissins Cap in 2014 will be equal t 91 millin tns. The Mdel Rule language maintains the riginal 2.5% per year reductin t the reginal RGGI cap fr the years 2015 thrugh Budget Adjustments (XX-5.3) The Mdel Rule cntains language t address the private bank f allwances thrugh tw distinct budget adjustments. The First Cntrl Perid Interim Adjustment fr Banked Allwances (first adjustment), adjusts the budget fr 100 percent f the first cntrl perid private bank f allwances (vintages 2009, 2010, & 2011) held by market participants as f the end f the first cntrl perid, that are in additin t the ttal quantity f first cntrl perid emissins. The first adjustment timing and algrithm is spelled ut in the Mdel Rule and is made ver the 7 year perid The Secnd Cntrl Perid Interim Adjustment fr Banked Allwances (secnd adjustment), adjusts the budget fr 100 percent f the 2012 and 2013 vintage allwances held by market participants as f the end f 2013, that are in additin t the ttal quantity f 2012 and 2013 emissins. The secnd adjustment timing and algrithm is spelled ut in the Mdel Rule and is made ver the 6 year perid after the actual size f the 2012 and 2013 vintage private bank is determined. 1

2 Summary f RGGI Mdel Rule Changes: Interim Cntrl Perids (XX-1.2, XX-1.5, XX-4.1, XX-6.5, and XX-7,2) The Mdel Rule creates interim cntrl perids that include the fllwing cmpnents: The additin f new defined terms, including: Interim Cntrl Perid, defined as each f the first tw calendar years f each three-year cntrl perid. Excess Interim Emissins, defined as any emissins (multiplied by 0.50) ver the amunt f allwances held at the end f each Interim Cntrl Perid. A new general requirement fr surces t hld allwances t cver 50% f emissins fr each Interim Cntrl Perid, subject t the existing true-up prcess and a March 1 deadline. The final cmpliance true-up at the end f the three-year cntrl perid will cntinue t require surces t hld allwances t cver 100% f the emissins fr the three years. The allwances already deducted t meet each f the tw annual Interim Cntrl Perid bligatins will be subtracted frm the three-year cmpliance true-up bligatin. Each tn f Excess Interim Emissins will be cnsidered a vilatin, subject t the rdinary existing enfrcement prvisins f the relevant agency n an annual basis. There will nt be a treble damages prvisin fr Excess Interim Emissins. The existing treble damages prvisin, fr any excess emissins at the end f the three-year cntrl perid, will remain unchanged. The deletin f existing triggers, market settling perid, and ther regulatry terms related t the ptential t extend the cntrl perid t fur years. 2

3 Summary f RGGI Mdel Rule Changes: Cst Cntainment Reserve (XX-5.3(c) and XX-9) The Mdel Rule cntains language fr the creatin and use f a cst cntainment reserve (CCR) that will prvide flexibility and cst cntainment fr the prgram. The CCR wuld cnsist f a fixed quantity f allwances, in additin t the cap, that wuld be held in reserve, and are nly t be made available fr sale if allwance prices were t exceed predefined price levels. The Mdel Rule cntains language fr an annual CCR withdrawal limit f 5 millin allwances in 2014, and an annual CCR withdrawal limit f 10 millin allwances thereafter. The CCR wuld initially be ppulated in 2014, and in subsequent years wuld be replenished nly as needed t maintain the withdrawal limit. Allwances frm the CCR wuld be fully fungible. The CCR allwances wuld be made available immediately in any auctin in which demand fr allwances at prices abve the CCR trigger price exceeds the supply f allwances ffered fr sale in that auctin prir t the additin f any CCR allwances. If the CCR is triggered, the CCR allwances will nly be sld at r abve the CCR trigger price. CCR Triggers Prices: $4 in 2014, $6 in 2015, $8 in 2016, and $10 in Each year after 2017, the CCR trigger price will increase by 2.5%. Offset Trigger Mechanisms (XX-1.2 and XX-10.3) The Mdel Rule deletes the existing ffset price triggers, that raise the allwable percentage f ffsets and that allw the use f internatinal CO 2 emissin credit retirements. The allwable ffset percentage wuld remain at 3.3%, and nly thse ffset credits that satisfy all Mdel Rule requirements fr a specific prject categry (including any new categries added) may be used fr cmpliance. These changes are cnsistent with the decisin t add a CCR mechanism and address the need fr cst cntrl in a much mre transparent and predictable way. Cntrl Perid Extensin (XX-1.2) The Mdel Rule deletes the ptential extensin f the cntrl perid t fur years and is replaced by the CCR. Offsets (XX-10.2 and XX-10.5) 3

4 Summary f RGGI Mdel Rule Changes: The Mdel Rule cntains language that prvides a new ffset categry knwn as Sequestratin f carbn due t refrestatin, imprved frest management r avided cnversin that States may adpt in lieu f the existing Affrestatin categry. A RGGI U.S. Frests Offset Prtcl has been develped, based mainly n the Califrnia Air Resurces Bard (CARB) U.S. Frests Offset Prtcl, t include: Imprved Frest Management; Avided Cnversin; and Refrestatin (which wuld replace the existing RGGI Affrestatin categry type). Wherever pssible, the Mdel Rule intentinally stays cnsistent with the (CARB) t leverage wrk dne by CARB and the Climate Actin Reserve (CAR), because the CARB prgram is expected t supprt a dmestic supply f these ffsets, and t prvide cnsistency. In additin t the Mdel Rule, States develped a separate U.S. Frests Offset Prtcl, as stated abve. States may chse t either incrprate the prtcl by reference int state regulatins, r chse t include the prtcl language within state regulatins. The RGGI prtcl uses a discunting apprach, instead f the buffer accunt apprach used by CARB, t address reversals and ensure permanence. Frestry prjects that have generated credits in a vluntary ffset prgram wuld be permitted t transfer t the RGGI prgram, assuming that they meet all ther RGGI requirements and there is n dublecunting. The general additinality requirements f the Mdel Rule fr existing RGGI ffset categries have nt changed. SF 6 Offset Categry (XX-10.5(b)) The Mdel Rule deletes the language referring t cnsistency applicatins assciated with reductins in emissins f sulfur hexafluride that were filed prir t 2009 in accrdance with Sectin 10.5(b)(3), as thse requirements are n lnger applicable. End-Use Energy Efficiency Offsets Categry (XX-10.5(d)) The Mdel Rule deletes language fr ffset prjects cmmenced prir t January 1, Incrpratin by Reference (XX-10) The Mdel Rule cntains updates fr all dcuments incrprated by reference. 4

5 Summary f RGGI Mdel Rule Changes: Miscellaneus Reserve Price (XX-1.2) The Mdel Rule cntains language t simplify the reserve price. The Mdel Rule increases the minimum reserve price by 2.5 percent each year and eliminates the text fr current market reserve price. Early Reductin Allwances (XX-5.3) The Mdel Rule deletes the ERA prvisins as they are n lnger applicable t the prgram. Undistributed and Unsld CO 2 Allwances (XX-5.2) The Mdel Rule cntains language t prvide the ability t retire undistributed and unsld allwances at the end f each cntrl perid, subject t each state s statutry and/r administrative prcess. 5