While we grapple with a state/regional level cap and trade greenhouse gas reduction schemed, it's very likely that we'll get serious national legislation next year aimed at the same thing.

Daniel Hall at the Common Tragedies blog has a nice discussion today about the difficulties facing such legislation, and some suggestions on how to approach it:

1. Auction all allowances, and then specify how to carve up the money.  Yes, you are going to have to buy off some industries and special interests in order to get legislation passed but it would be more transparent to structure this as a straight subsidy.
2. Use more of the revenues to offset other taxes.  Per capita rebates would make the policy less regressive.
3. Fund R&D, particularly early stage basic and applied research.  Limited funding, if any, for technology deployment.
4. Fund infrastructure: get in place the networks that will enable technology deployment.  Upgrade the electric grid, fund mass transit, consider funding CO₂ pipelines (depending on the results of carbon capture and storage research).
5. Link domestic targets to international actions, particularly from China and other major trading partners.  Promise to do more if they take action to reduce emissions.

The Western Climate Initiative folks took the wraps off of their cap-and-trade greenhouse gas reduction plan this morning. (Full details at the WCI page.)

I wrote Friday about the central problem: how to set the "cap" that works as a starting point for eventual greenhouse gas reductions. Roger Pielke Jr., a political scientist who has closely followed this process elsewhere, pointed out to me in an email this morning that setting bad caps has meant that the two big cap-and-trade programs so far — in Europe and the Northeast US (RGGI) — are not reducing emissions:

Cap and trade has yet to lead to meaningful emissions reductions for
carbon dioxide in the EU, and looks to have a similar prospect in
RGGI, why should we expect WCI to be any different?

 Jim Norton and Sarah Cottrell, the Richardson administration's point people on the issue, told me this morning that the WCI folks believe they have learned from the EU and RGGI experience. Advance record-keeping and accounting will be used before the capping and trading begin in 2012 to set realistic starting point caps, they said.

Key questions remain, however. The whole system relies on allowances that will be either handed out to emitting industries, or auctioned to the highest bidder. How that will be done will be dealt with on a state-by-state basis. So one of the most important issues involved here remains to be worked out.

Listening to the global rhetoric about U.S. oil imports, you could be forgiven for thinking it all comes from Venezuela and the Middle East. In fact, two of our three largest sources of petroleum are here in North America - Canada and Mexico. Which is why this note from Platts is so significant:

A milestone was reached last month, and it's nothing to celebrate for anybody: Production of the Cantarell oil complex in Mexico's Sound of Campeche dropped below 1 million b/d in August for the first time in 13 years.

As Platts' Mexico city correspondent Ron Buchanan reported today, Canatarell produced more than 2.2 million b/d as recently as 2004. The year-on-year decline for August is 26.7%, more than 350,000 b/d.

Total Mexican output in August was down about 9.2% from the previous year, and there was some good news in the report. As Ron noted, the Ku-Maloob-Zaap (KMZ) complex further out in the Sound of Campeche, produced 716,979 b/d in August, up from 504,229 b/d a year earlier. The August figure is a record output.