Southern California Edison Company's Comments on WCI Draft Scoping Plan

Southern California Edison Company’s comments on wci offsets recommendations

MICHAEL D. MONTOYA

LAURA I. GENAO

CATHY KARLSTAD

Attorneys for
SOUTHERN CALIFORNIA EDISON COMPANY

2244 Walnut Grove Avenue
Post Office Box 800
Rosemead, California 91770

Telephone: (626) 302-6842

Facsimile: (626) 302-1935

E-mail:

Dated: May 1, 2008

I. introduction

Southern California Edison Company (“SCE”) appreciates the opportunity to submit the following comments on the Draft Offsets Design Recommendations issued April 3, 2008 (“WCI Recommendations”).

II. SCE strongly endorses the recommendation of a robust offset program

SCE strongly endorses WCI’s recommendation that a robust offset program be part of WCI’s approach to reducing greenhouse gases (“GHG”). It is critical that the subcommittee bear in mind that the purpose of achieving GHG reductions is to obtain a beneficial reduction in the risk of global warming. Without substantial reductions in GHG worldwide, and especially in the developing countries that are resisting committing to reductions, the Intergovernmental Panel on Climate Change forecast path of significant climate damage is inevitable. However, inclusion of a strong offset program without geographic restrictions, gives WCI the opportunity to:

· Achieve significant cost savings for entities within the jurisdiction of its partners;

· In conjunction with cost savings from offsets, reduce the potential for leakage when enterprises move from within WCI’s regions to areas lacking GHG caps;

· Encourage early reductions in GHG, which are ton-for-ton more valuable than later reductions, from a global warming perspective; and

· Encourage innovative GHG reduction technology and practice and transfer these to areas of the globe that have not yet embraced such technology and practice. As other parts of the world receive the benefits of energy efficiency technology, among other things, they will be able to devote effort to adopting more effective low or zero technology without locking in high-emitting transition technologies.

III. SCE’s specific comments on two of WCI’s recommendations

A. Role of the Offset Program

WCI states that by lowering overall costs, an offset program could support a more aggressive reduction cap than might otherwise be feasible for the cap-and-trade system. Such a recommendation defeats the purpose of an effective offset program designed to help minimize cost of implementation at a predefined cap. Offsets should instead be used to help meet a reduction cap at the lowest possible cost. If the reduction cap is adjusted to be more aggressive, there will be greater costs to all under that cap, even with offsets to achieve that cap.

B. WCI Should Revise Its Preference For Projects Located Within A Partners’ Borders

The WCI Recommendations argue for an offset approach that gives preference to projects located within WCI jurisdictions. WCI should revise this recommendation to state clearly that its preference for WCI offset projects is not a bar to offset projects outside its partners’ borders. SCE understands the strong temptation to insist that projects be located within WCI, however, the main arguments put forth for such a restriction (i.e., that such a restriction will yield “green jobs” for the region and provide co-benefits in the form of improvement in air or water quality) are not supportable when viewed in light of all available evidence.

Instead, restrictions are more likely to lead to overall increases in the cost of meeting the defined GHG reduction target and timetable. When these increased costs are taken into account, the economic well-being of the region’s citizens suffers and GHG leakage increases.

For this reason, SCE believes that all offset projects, whether or not located within the WCI, should be subject to comparable rigorous oversight, validation, verification and enforcement and that systems can be implemented to assure that offset projects located outside of the WCI meet the same standards as those projects located within the WCI. Upon implementation of an offset program that states a preference for offsets within the region, but which also allows valid offsets from outside WCI, entities will begin to develop their offsets programs.

SCE’s own experience in crafting a Voluntary Early Action (“VEA”) GHG reduction proposal for submission to the California Air Resources Board, leads it to believe that seekers of offsets will look first to reasonable projects, located nearby, which yield GHG reductions at a dollar per metric ton cost, as opposed to seeking the lowest possible cost project portfolio.

SCE’s own actions follow this course and it will propose a portfolio of VEA projects that include a majority of projects within California, as well as some that are of extremely high quality and low cost per ton outside the state.

While there is currently no bar to offering offset projects outside California, SCE understands that Assembly Bill 32 strongly encourages seeking out co-benefits within the state and SCE is committed to responding positively to that preference. SCE believes the vast majority of WCI–regulated entities will do the same with respect to offering offsets from within WCI.

C. WCI Should Revise Its Recommended Limit on Compliance Through Offsets

The WCI Recommendations endorse an overall limit to the proportion of offsets a regulated entity can use to comply with its GHG reduction obligations. The subcommittee should be mindful that endorsement of such a limit works against cost-saving, thus limiting the regulated entities’ financial capacity to invest in the innovative technology changes that will be required to meet the long-term GHG reduction goals necessary to deal effectively with the threat of global warming. Forcing reductions from within the WCI jurisdiction will also lead to increased leakage.

The subcommittee will have a difficult task picking anything other an arbitrary offset limit. Instead, the subcommittee should consider foregoing such a limit for a reasonable period of time to determine whether the fear that a preponderance of compliance obligations will seek to be met through offsets or that a majority of offsets will be sought from outside the WCI jurisdiction.

Additionally, SCE encourages WCI to focus on developing practical, efficient criteria and processes for validating offsets. SCE is encouraged that the subcommittee report already includes many sound recommendations addressing the issues surrounding validation and looks forward to continuing to participate in the subcommittee’s work.

IV. Conclusion

For all of the foregoing reasons SCE urges WCI to incorporate changes to the WCI Recommendations as set forth above.

Respectfully submitted,