Midwestern Greenhouse Gas Reduction Accord

www.midwesternaccord.org


Overview
Market Size and Scope
Offset Project Eligibility
Additionality Requirements and Project Methodologies
Project Approval Process


Overview

Type of Standard and Context

The Midwestern Greenhouse Gas Reduction Accord (Midwestern Accord) calls for the establishment of GHG emission reduction targets and the development of a regional cap and trade program. It was established in 2007 by governors of six US states in the Midwest and one Canadian province. The Midwestern Accord cap and trade program aims to begin the first compliance period on January 1, 2012.

The Midwestern Accord Advisory Group was convened in 2008 to develop draft recommendations for the establishment of GHG emissions reduction targets and for the design of a regional cap and trade system. These draft recommendations were released on June 8, 2009 the final design recommendations will be presented during the summer of 2009. The recommendations include an emissions reduction target of 20% below 2005 levels by 2020 and 80% below 2005 levels by 2050 (Midwestern Accord Advisory Group, 2009). However, the 2020 target could fall to 18% below 2005 levels if allowances are released from the cost containment pool. Offsets are recommended as part of the proposed cap and trade program and are required to be real, additional, verifiable, permanent and enforceable. The use of offsets is recommended to be limited to 20% of each regulated facilities compliance obligation. The Advisory Group recommends that this limit on the use of offsets be subject to review and adjustment based on experience with the offset program, including the “jurisdictions’ comfort level with offsets and the availability of offsets that meet the protocol requirements and cost containment needs of the program”.

Standard Authority and Administrative Bodies

The Midwestern Accord Advisory Group recommends the establishment of a Regional Administrative Organization (RAO), which would include a board staffed by representatives from each participating jurisdiction and additional staff employed directly by the RAO. The RAO would serve as a technical assistance organization and would have no regulatory or enforcement authority itself. Accord Partner jurisdictions would continue to serve as the regulatory and enforcement authorities.

Regional Scope

As of June 2009, the Midwestern Accord had 6 participating US states in the Midwest and 1 Canadian province: Iowa, Illinois, Kansas, Manitoba, Michigan, Minnesota, and Wisconsin. Additionally, Indiana, Ohio, Ontario, and South Dakota are serving as observers in the process and considering participation.

Recognition of Other Standards/ Linkage with Other Trading Systems

The Advisory Group recommends that the participating stated and province seek to link the Midwestern Accord to the Regional Greenhouse Gas Initiative (RGGI), the Western Climate Initiative (WCI), the European Union Emissions Trading Scheme (EU ETS) and other mandatory GHG reduction programs as appropriate. The Advisory Group also recommendeds that as part of this evaluation, the participating jurisdictions consider whether or not to accept offset credits generated under the Clean Development Mechanism and Joint Implementation. That examination should consider the extent to which Midwestern Accord offset requirements are met by these programs and whether or not the programs being linked to accept these credits.

The Midwestern Accord Advisory Group recommends that the proposed program enable a transition to a federal program in the U.S. and Canada, and that in the event the Midwestern program issues allowances before a federal program is implemented in Canada or the United States, that the jurisdictions work to ensure that those allowances are fully recognized and valued in the operation of a federal program.

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Market Size and Scope

Tradable Unit and Pricing Information

To be determined.

Participants/Buyers

Regulated facilities under the Midwestern Accord are recommended to include all facilities in participating states and province with annual emissions of greater than 25,000 metric tons that are in the following sectors and use the following fuels: electricity generation and imports; industrial combustion and process sources; residential, commercial, and industrial fuels; and transportation fuels. The Advisory Group recommends that the following facilities be exempt: electric generation facilities with a capacity of less than 25 MW and the carbon dioxide emissions from combustion units that burn 100% biomass.

Current Project Portfolio

N/A

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Offset Project Eligibility

Project Types

To be determined.

Project Locations

Initially, the Midwestern Accord Advisory Group recommends that offset projects be limited to Midwestern Accord participating jurisdictions and those states and provinces that have signed a Memorandum of Understanding (MOU) with the Midwestern Accord. States and provinces not part of the Midwestern Accord must agree to carry out certain administrative tasks related ot the evaluation of offset projects, and may be required to have a GHG regulatory program comparable to the Midwestern Accord. Participation of international offsets beyond the U.S. and Canada is to be determined.

Project Size

To be determined.

Start Date 

The start date has not been determined. However, the Advisory Group recommends that early action offsets be provided allowances from under the cap so long as their integrity is comparable to offsets approved under the Midwestern Accord’s offset program.

Crediting Period

To be determined.

Co-benefit Objectives and Requirements

To be determined.

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Additionality Requirements and Project Methodologies

Additionality Requirements

The Midwestern Accord requires that offsets be additional. The Midwestern Accord Advisory Group recommends that additionality of offsets be defined as:

The reductions resulting from offset projects must be shown to be “in addition to” reductions that would have occurred without the incentive provided by offset credit. To be eligible for offsets, offset projects cannot be required by law or regulations, and must exceed baseline criteria. The baseline should use standardized criteria (including but not limited to, performance standards, financial feasibility criteria, market penetration, and project start date) that serve to exclude “business as usual” projects from eligibility.

Project Methodologies

The Midwestern Accord Advisory Group recommends the use of standards-based protocols. Prior to program launch the Advisory Group recommends selecting initial offset project types and protocols through the use of the Technical and Scientific Committees, which will provide recommendations to the jurisdictions. States and province jurisdictions will collectively decide on how to proceed with the recommendations.Specific requirements to ensure offsets are permanent have been recommended by the Midwestern Accord Advisory Group:

Emission reductions or removals must be backed by guarantees if they can be reversed, i.e., re-emitted to the atmosphere. For emission reductions or sequestration activities that can be reversed, adequate safeguards should be established to minimize the risk of reversal, or a mechanism should be provided for the replacement of those tons.

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Project Approval Process

Validation and Registration

The Midwestern Accord Advisory Group recommends a two-step review process for individual offset projects. Validation, referred to as a ‘consistency determination,’ a preliminary review prior to the project commencement would serve as the first step. This review can occur prior to project development, to provide project developers with greater certainty, alternatively, as is the case with RGGI, the first and second review steps can occur at the same time.

Monitoring, Verification and Certification

The second recommended step in the review process, monitoring and verification, would include the application for offset credits equal to the actual emissions reductions or sequestrations demonstrated by the offset project. The Advisory Group recommends that all applications be verified by an accredited, independent third-party verifier, and that these verified applications by reviewed by states or provinces. Additionally, the Advisory Group recommends periodic auditing of projects. Certification requirements are to be determined.

Registries and Fees

To be determined.

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