Ecotrust and Ecotrust Canada submit the following comments on the Western Climate Initiative's (WCI) Draft Design of the Regional Cap-and-Trade Program. As Canadian and American non-profit organizations dedicated to conservation, we support WCI's transnational effort to reduce greenhouse gas emissions (GHG).
 
We appreciate the enormous efforts of the WCI Partners in coalescing stakeholder input and building the program. In this final round of public comment on the Draft Design document we encourage WCI staff to take whatever steps are necessary to ensure regional emission reduction goals are achieved or exceeded, costs of compliance are minimized, disproportionately-affected populations and entities are compensated, and the system retains its environmental integrity. Our specific recommendations follow.

Scope

In the July 23, 2008 draft design, carbon dioxide emissions from the combustion of biomass were discussed in the context of scope by WCI for the first time. The new section 1.3 on page two proposes that these emissions be categorically excluded from the scope of the cap-and-trade program. Biomass and biofuels hold promise as alternatives to fossil fuels. However, their potential for reducing GHG needs to be evaluated on the merits. Statutory and administrative pronouncements of carbon-neutrality do not achieve emission reductions on the ground. The combustion of biomass and biofuels may be carbon-neutral or carbon-emitting depending on the circumstances. If treated under the proposed cap-and-trade program, regulated biomass facilities that emit less than 25,000 metric tons of carbon dioxide equivalents (CO2e) annually will not have a compliance obligation. See Section 3.1.

We recommend that WCI Partners interested in promoting biomass-fired energy
development be required to undertake a Life Cycle Analysis (LCA) of biomass combustion on a programmatic scale, taking into account emissions from production, harvest, transport and combustion. Section 8.2 of the Draft Design allows Partners to dedicate parts of their allowance budget specifically for this kind of renewable energy research. The results of the analysis could provide either a rational basis or not for special treatment and/or categorical exemption of particular biomass and biofuel projects.

Role of Other Policies

Chapter 5 of the draft design emphasizes the role that complementary and alternative policies will play in assisting the cap-and-trade program achieve GHG reductions. Section 8.3 allows Partners to distribute allocation resources to help low-income consumers deal with higher energy costs. Section 8.2 establishes a mechanism for dedicating a percentage of each Partner's allowance budget for public programs including “emission reductions and sequestration in agriculture and forestry.” These are key aspects of the Draft Design document supported wholeheartedly by our organizations.

We appreciate the contribution private landowners will make in reducing atmospheric levels of GHG through well-conceived forest offset projects – discussed more fully below. Yet in both the Western United States and Canada the vast scale of public lands, particularly those set aside for conservation management, may play a significant role in regulating GHG emissions. The health of these forests as our ecosystems adapt to changing climate conditions is critically important. We are encouraged by proposed cap-and-trade legislation in the United States that would appropriate substantial federal funds to help address the impacts of climate change on public lands and wildlife.

 
Similarly, Ontario recently announced plans to protect at least fifty percent of its northern boreal region, in part for the protection of this carbon-rich ecosystem.1 As WCI Partners develop their regional cap-and-trade program, they should consider implementing similar complementary and alternative policies that have the potential to achieve significant GHG reductions.

Offsets Generally

Over the past seven months our organizations have examined cap-and-trade policy with an eye towards informing ourselves, our colleagues in the wood products industry, WCI Partners, and ultimately the public and legislators on the role forests should play in climate change mitigation. Given that WCI has chosen initially to not cover the emissions of the forestry sector in its Draft Design, forest offset projects can only assist GHG reductions if offset credits yield the same benefit to the atmosphere as an emission reduction under the cap. We urge the use of high quality forest offset projects that ensure real, credible, and verifiable emission reduction. Accordingly, robust protocols are required to treat the criteria of baseline, additionality, permanence, leakage, verification,
and enforcement.

Process for Development of Forest Offset Protocols

Existing forest offset protocols provide models for use by WCI. While no
agreement has been reached in the ongoing stakeholder processes on approaches to contentious issues such as baseline/additionality and leakage, these discussions have been productive and are continuing. We support the WCI in not rushing stakeholder processes and making the commitment to coordinate review and development of protocols beginning in 2009. (See Section 9.4.)
 
Several proposals have been submitted to WCI for a committee to address forest and land use change. WCI will be best served if it independently funds and supports a transparent and balanced regional process that would build on existing work and design protocols specifically for use by WCI Partners. If WCI Partners do not staff this process directly, contracts should be awarded following an open and competitive selection process.

Inclusion of Harvested Wood Products as an Offset Type

Harvested wood products have been extensively discussed in stakeholder processes as one of various affected carbon pools for forest management projects, along with standing trees, soil carbon, leaf litter, shrubs, standing dead trees and woody debris. We encourage WCI only to consider harvested wood products as a potential carbon pool that is affected by forest management activities, and not as a unique project type. We do not know of any regulatory or voluntary system that considers forest products as a distinct project type, and
do not understand the rationale as the impact of forest products on carbon cycles and emissions can only be understood in the context of a Life Cycle Analysis (LCA).
 
Before wood products are included as a carbon pool an appropriate LCA should be conducted that addresses emissions from harvest, transport, manufacturing and disposal. Because forest product pools can be potentially increased by more intensive harvesting, careful attention should be paid to assess and protect against undesired adverse impacts on water quality, biodiversity, scenic values, and recreational opportunities that might result from harvest intensification.

Quantitative Limitations on Use of Offsets

For all offset types and project categories we recommend the assessment and elimination of adverse impacts, recognizing that achieving emissions reductions at the price of water quality or biodiversity is not desirable. Ideally offsets will provide health and environmental co-benefits. At a minimum, protocols must ensure that forest and other offsets will cause no adverse effects on human health or the environment.

Until WCI achieves success in ratcheting emissions downward over several
compliance periods, and the experience illustrates high quality offsets without adverse human and environmental effects, a functional quantitative limit on use of offsets will help ensure real GHG reductions are achieved. The WCI intends to set a regional cap of 15 percent under 2005 emission levels from 2012 through 2020; the pro-rata reduction in any of the three compliance periods during those nine years will be approximately five percent. Assuming there was a ten percent offset limitation in each of the compliance periods (the upper range proposed by WCI in its Draft Design), it is possible that a 100,000 CO2e annual emitter could use offsets to achieve a third or more of its total expected reductions over the nine year period between 2012 and 2021. While the costs of compliance are mitigated, the success of the program depends on the assumption that a large volume of offsets will deliver permanent, truly additional atmospheric carbon reductions.

To ensure environmental integrity and regional credibility, WCI should set a
quantitative limit lower than the upper range of ten percent suggested which results in substantive emission reductions in the capped sectors in each compliance period. Once emission targets are being achieved and offset quality concerns alleviated, the WCI could consider relaxing the quantitative limits.

In closing, Ecotrust and Ecotrust Canada look forward to remaining engaged and supporting development of the cap-and-trade program. Thoughtful innovation and implementation of forest conservation practices holds great promise for reducing GHG emissions.

Contacts

Bettina von Hagen
Vice President, Natural Capital Fund
Ecotrust
Portland, Oregon
bettina@ecotrust.org
503.467.0756
Daniel Arbour
Project Manager
Ecotrust Canada
Tofino, British Columbia
daniel@ecotrust.ca
250.725.2536

Click here to download a PDF version of the submission with footnotes.