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MGA Cap and Trade

MGA Cap and Trade. Overview of Cap and Trade and MGA Process www.midwesternaccord.org For KEC – Ray Hammarlund. Typical Components of Cap & Trade. Scope and Point of Regulation Emissions Measurement, Monitoring & Reporting Setting the Cap Distributing Allowances Offsets

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MGA Cap and Trade

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  1. MGA Cap and Trade Overview of Cap and Trade and MGA Process www.midwesternaccord.org For KEC – Ray Hammarlund

  2. Typical Components of Cap & Trade • Scope and Point of Regulation • Emissions Measurement, Monitoring & Reporting • Setting the Cap • Distributing Allowances • Offsets • Compliance Periods and Enforcement

  3. Committees for MGA • Scope/Electricity (Nancy Jackson) (April 7-8) (June 2-3) • Target Setting (Tom Gross) (April 8-9) (June 3-4) • Modeling (April 27-28) (June 4-5) • Allowances (April 28-29) (June 9-10) • Offsets (Chuck Rice) (Ray Hammarlund-Chair) (April 29-30) (June 10-11) • Full Advisory Group Meeting (June 23-24) • Full Committee Conference Call (July 10) • Model Rule (July 22) – GHG Public Meeting

  4. What is Cap and Trade? • Cap on total emissions from a defined set of sources • Cap is divided into one-ton permits, or allowances, and are distributed into the market. • All emission sources are required to hold allowances equal to their emissions. • Trade allowances to assure most cost effective reductions. • Sources will reduce as long as the cost of allowances is greater than the reduction.

  5. Scope – First big question • What sources are capped in the cap and trade protocol? • Point Source - Easier • Non-Point Source – Difficult • 100’s, 1000’s or million’s? • Which greenhouse gases are capped? • Are they all in the same agreement or do you have separate protocols for each?

  6. EU Cap & Trade • Started with point sources such as coal plants • Did not cap autos (large tax on petroleum in EU) • Will begin to cap aircraft shortly • Did not allow for offsets (agriculture and forestry)

  7. Point of Control – Part of first question • Upstream or downstream, that is the question • Upstream – farther away from the customer • Petroleum in EU is regulated upstream – at the point of refining or importation • Downstream – closer to the customer • Coal in EU is regulated downstream – at the point of generation (as opposed to upstream (i.e. extraction point )) • Other points – At wholesale or retail • Hybrid system for different pollution sources

  8. Allowances – The BIG question (that begets many bigger questions) • How many allowances to allocate? • What entity does the allocation? • Do you give away or sell at a market price? • Do you do a combination of free and saleable credits? • How do you set the initial price? • What do you do with the revenue?

  9. Offsets – Another Question • What are offsets? • A project-based reduction that is demonstrated outside the capped sector. • Must be “real”, surplus (or additional), verifiable, permanent and enforceable (RSVP &E) • Typical offsets – forest reclamation, agriculture soil sequestration, animal methane digestors.

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