A New Direction in Our Energy Future: The Governor of Wisconsin Describes Comprehensive Plans in the Midwest to Address Energy Security and Climate Change

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Rising prices, increasing dependence on imports, growth in domestic and global energy demand, and mounting concern over how to address climate change while sustaining and enhancing economic growth and job creation pose serious challenges to the Midwest's energy future. The region recognizes that it has an obligation to provide leadership on these issues, particularly given the federal government's failure, to date, to provide a comprehensive national response to climate change.

Midwestern Regional Greenhouse Gas Reduction Accord

The Midwest relies heavily on electricity generated by traditional coal-fired plants and on largely imported petroleum to fuel its agricultural, transportation, and industrial sectors, all of which represent major sources of greenhouse gas (GHG) emissions. However, because of its vast base of energy resources, ingenuity, and manufacturing strength, the area has perhaps the greatest potential of any region in North America to transform vulnerabilities into advantages.

At a meeting of the Midwestern Governors Association on November 13, 2007, the leaders of six U.S. states and one Canadian province signed the Midwestern Regional Greenhouse Gas Reduction Accord. The accord commits its members--Wisconsin, Minnesota, Illinois, Iowa, Kansas, Michigan, and Manitoba--to set up a carbon cap-and-trade scheme across the region by July 15, 2010. It becomes the third region in the United States to plan a carbon cap-and-trade program, after the Regional Greenhouse Gas Initiative (RGGI), to start in 2009, covering power producers in ten states in the northeastern United States and the Western Climate Initiative covering the U.S. states and Canadian provinces in the western part of the continent.

In addition, Indiana, Ohio, and South Dakota signed on as observer states to the accord, and, together with Missouri, Nebraska, and North Dakota, the region has also adopted an energy security and climate stewardship platform. Under the accord, GHG emission reduction targets and time frames will be established for the region consistent with any individual state's aim.

A working group has been set up comprising governors' staff members and representatives from industry, environmental, and consumer groups. The group will work on the accord and is projecting completion of a cap-and-trade agreement and a model rule by November 2009 (as of this writing). At this point, little has been decided in terms of the size of the emissions caps or the makeup of the scheme itself.

Emissions Trading Scheme

The emissions trading scheme (ETS) is expected to include the six GHGs--carbon dioxide (C02), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride--covered by the Kyoto protocol. It will also encompass as many emitters as possible, unlike RGGI, for example, which only covers power generators.

Those working on the cap-and-trade plan will draw from the most effective aspects of the emissions trading systems, such as the Chicago Climate Exchange and the European Union's ETS in Europe. The Midwest's system will also be developed in a way that allows linkages to other plans. This will help to create economies of scale and increase market efficiencies, diversity, and liquidity while reducing costs.

Efforts will also be made in the design to maximize economic and employment benefits, while minimizing any transitional job losses, as well as avoiding carbon leak age as a result of generation and GHG emissions shifting to nonparticipating states. Also important in the development of the accord is addressing any potential interaction or integration with a future federal cap-and-trade program, if such a program is developed. (President-elect Barack Obama has advocated national GHG emission caps and emissions trading.)

Energy Security and Climate Stewardship Platform

As part of the agreement, members will have to join The Climate Registry--a U. …