The Midwest Governors Association Greenhouse Gas Accord just completed its meeting in Traverse City, Michigan. The final meeting of the Accord is scheduled for Minneapolis on May 11 and 12, 2009.
One of the highlights at the meeting was the presentation of initial economic modeling results. The modeling examined both the impact of a cap and trade program (20% by 2020 and 80% by 2050 within the Midwest for EGU, industry and transportation) and the impact of 1% and 2% per year energy saving from 2015 to 2030 for electricity. The modeling did not take account of the effect of imposing the cap on the first jurisdictional deliverer of electricity. Principal observations about the modeling results are as follows:
1. The allowance price of cap and trade in combination with 1% energy efficiency was $5 in 2015 increasing to $15 in 2030. In the case of cap and trade and 2% energy efficiency, the allowance costs were $11 in 2015 and $32 in 2030.
2. The 1% energy efficiency and cap and trade run is predicted to cause some 17 GW of coal fired capacity into early retirement (1/3 of the total coal-fired fleet) and results in half of the CO2 reductions being lost in leakage to sources in other states. There is almost no indication of how these leakage assumptions would be affected by the imposition of the first jurisdictional deliverer concept that is likely to be part of the MGA's ultimate recommendations.
More information about the MGA GHG Accord can be found at: https://www.midwesternaccord.org/Meeting%20material%20pages/GHG-meeting-9_309.html.
This article was authored by David M. Flannery, Jackson Kelly PLLC. For more information on the author see here.