US GHG Markets
RGGI
In August 2006, the participating states issued the model rule for the Regional Greenhouse Gas Initiative (RGGI). TFS is closely monitoring the eight Northeastern states' (Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, Vermont and Massachusetts) efforts to implement the program by 1 January 2009. While Rhode Island, Pennsylvania and Maryland have observer status and may join the program at a future date. Key aspects of RGGI, including percentage of allowances auctioned versus baseline allocation and qualification of domestic and international offsets are still being finalized.
California
In September 2006, AB 32, the Global Warming Solutions Act, which caps California's GHG emissions at 1990 levels by 2020, was signed. This reduction will be accomplished through an enforceable statewide program that will be phased in starting in 2012. The Act directs the California Air Resources Board (CARB) to develop appropriate regulations, adopt market-based compliance mechanisms including cap-and-trade and establish a mandatory reporting system to track and monitor global warming emissions levels.
TFS is utilizing its experience in the international marketplace to prepare our clients for the constraints and opportunities presented by these regulatory frameworks. We are also providing input within the legislative process to positively affect the design and implementation of the programs. Recent proposals by the newly elected Congress indicate that Federal GHG legislation could be enacted in the near future. Policymakers involved in RGGI and AB 32 are also considering links to the EU-ETS scheme in Europe. TFS will continue to monitor these developments and provide timely updates to our clients.
Voluntary markets
With the new congressional majority held by the Democrats, the issue of climate change and carbon emissions in particular will take an increasingly prominent role in policy issues in the US.
CCX — Chicago Climate Exchange
The CCX, like all current US carbon schemes, is a voluntary reduction marketplace consisting of corporations, state and local governments and various institutions. TFS is a longstanding member of the CCX and can execute client business on the exchange.
VER — Voluntary Emissions Reductions
Outside of the CCX most domestic GHG transactions are done on a direct procurement basis by companies via corporate social responsibility (CSR) programs or by governmental agencies in conjunction with state or local government offset programs.
There are already several bills proposed including the Feinstein/Carper Bill, the Jeffords Bill and the Lieberman/McCain Bill. In response, companies are now looking to gain first-movers advantage with their carbon strategies by participating in the voluntary market. Credits from these transactions are referred to as Verified Emissions Reductions (VERs) and can conform to several alternative standards for VERs.
TFS assists our clients in determining the quantity of offsets needed and in structuring purchase agreements for VERs from either domestic or international projects.
We have a solid track record of matching clients with projects that represent the highest standards.
Clients who enter VER transactions have the added advantage of developing valuable transactional experience in the carbon marketplace prior to the formation of any formalized regulatory regimes in the US and may potentially gain if early credits are recognized under future federal carbon legislation.
In 2006 TFS Energy offset its own emissions with a purchase of 5,000 VERs from a solar energy project in Laos. The project was verified under the Voluntary Carbon Standard.
TFS is in a unique position to capitalize on its dominant role in international carbon trading which will serve as a major asset as all the development of these regulations take hold in the domestic marketplace.