Bottom-up policy lessons emerging from the Western Climate Initiative's development challenges

Abstract

Cap-and-trade has become a key climate policy strategy, in part due to concerns about the political feasibility of carbon taxes. However, federal cap-and-trade legislation remains elusive within North America, and it is increasingly likely that a global carbon market will be composed of a patchwork of regional bottom-up schemes. The challenges faced by the Western Climate Initiative (WCI), the most comprehensive GHG trading system currently being developed in North America, are examined. The WCI has had mixed success and several lessons concerning the political and technical requirements for bottom-up, regional GHG trading are offered. Although substantial administrative progress has been achieved, only two of its original eleven partners will be ready for trading in 2013. Creating a carbon market is more than a technical or political challenge – it is a social process. The WCI experience highlights the importance of the logic of collective action, the need for jurisdictions to see individual benefits, the role of evidence from other policy contexts, and the need for broad agreement about the purpose of policy. These factors can significantly shape the chances of survival for the carbon market even before actual trading begins.

Policy relevance

An analysis is provided of the political and administrative challenges facing the creation of the Western Climate Initiative, the largest multi-jurisdictional sub-national North American GHG cap and trade system initiated to date. Policy factors for both the coalescence and partial disintegration of the system are discussed for all 11 original partner jurisdictions. Key lessons are highlighted for policy and strategy that may be of use in other bottom-up initiatives of this type: acknowledging the multi-level governance aspects of climate policy (including the need for jurisdictions to see individual benefits), paying attention to the dynamics of collective action, the centrality of broader political and economic discourse in defining interpretations of the opportunities and costs of cap-and-trade, and the need for broad agreement about policy purpose.

Keywords:

• cap-and-trade
• domestic policy instruments
• multi-level governance
• policy formation
• political processes
• Western Climate Initiative

Acknowledgements

The author thanks Michael Grubb, Hadi Dowlatabadi, the Climate Policy editors, the anonymous reviewers for their helpful comments regarding this manuscript, and all of the people within the jurisdictions involved who shared information about and provided insights into the policy-making process. Financial support for this work came from the Social Science and Humanities Research Council of Canada, and the Pacific Institute for Climate Solutions.

Notes

While the RGGI initially included the states of Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont, Maryland and Rhode Island had joined by 2007. The state of New Jersey withdrew in 2011 (New Jersey, 2011).

Canada formally withdrew from the Kyoto Protocol in 2011.

For instance, California was already heavily engaged in changing fuel efficiency standards as part of AB32, and British Columbia had already covered transportation under its carbon tax.

The CARB (2008) analysis covered all policies encapsulated by AB32, of which cap-and-trade was just one.

Thanks to an anonymous reviewer for drawing attention to RGGI's early decision to use auctioning to protect against windfall profits in the EU ETS.

These bills were still in committee when the house adjourned, leaving Oregon's WCI status unclear. It should be noted that despite the fact that the Oregon legislature has used the putative ‘failure’ of the EU ETS as a reason to halt the internal development of cap-and-trade, the EU ETS should not necessaily be considered a failure: although low prices have hindered its ability to incentivize investment in low carbon energy (Grubb, 2012), emissions have stayed within the EU ETS cap and it has successfully created the largest carbon market in the world (Ellerman et al., 2010).

The Bloc Québecois Party is the only federal party based solely in one province, i.e. Quebec. All members of the public who affiliate themselves with the Bloc Québecois will be in or from this province.

By 2010, polls suggested that about 18% of US voters supported the Tea Party (Zernike & Thee-Brenan, 2010).

This includes both Houses, where there is a bicameral legislature. There were no cases in which one party had a majority in one of the Houses while the other party had a majority in the other House. All provincial legislatures in Canada are unicameral.

Napolitano went on to declare climate change a national security threat under the Department of Homeland Security (Howell, 2010).

The 2011 New Mexico Senate had a Republican majority. However, the Judiciary Review Committee had a Democrat majority and it was in this that party line voting defeated these bills.