The Western Climate Initiative is a path-breaking effort. Insufficient federal progress prompted seven states and two provinces to join together to reduce climate pollution by means of an economy-wide cap-and-trade program. It’s a momentous opportunity, and many folks have been working hard to ensure that it’s a success.

Unfortunately, there’s now cause for serious concern.

Yesterday evening, WCI released its draft proposal (PDF). It proposes an initial cap that would cover less than half of the region’s total emissions. Most surprisingly, WCI does not recommend including emissions from transportation fuels, by far the largest source of climate pollution in the West. [Update 3/7: The recommendation doesn’t exclude transportation precisely, but rather defers the decision until further economic studies are completed.]

The proposal is at odds with WCI’s own stated principles that include a commitment to cover “as many emissions sources as practical.” And for an effort born of frustration with federal lawmakers, it’s bizarre that the proposal is significantly smaller in scope than recent federal bills (PDF), including Leiberman-Warner.

There are no big technical challenges to including transportation fuels. In fact, the WCI admits that while there are a couple of hurdles, it’s administratively feasible to include transportation emissions. So what’s going on?

No one knows for sure.

I have every reason to believe that Washington’s and Oregon’s representatives are taking the responsible approach, negotiating to include transportation fuels.

That’s as it should be, since without reductions from the transportation sector, it will be virtually impossible for the Northwest states to reach their climate goals. In fact, fully 47 percent of Washington’s emissions come solely from the transportation sector.

Perhaps other states are reluctant to go along with a true economy-wide cap on carbon. Perhaps there are misunderstandings about how price affects demand. Perhaps there’s simply fear of political fallout from pinching oil companies.

Or perhaps I’m being too hard on WCI. The truth is, it’s very hard to tell exactly what they intend to do in the future. In places, they seem to want to include transportation, but then they also want to consider some other untested options as a substitute for an enforceable cap — things like low-carbon fuel standards. They seem to want further economic analysis, and then they seem to gesture at excluding transportation if it’s deemed that prices will rise.

Mostly, WCI seems to want to delay making a decision. But it’s a decision so fundamental to the program that it affects every other decision. In fact, it jeopardizes the integrity of the entire initiative.

Maybe the best way of understanding what’s going on is buried at the end of a technical appendix:

A problem with covering oil upstream is that the only compliance options available to regulated entities are buying allowances, selling or blending non-fossil fuels, or reducing fuel sales.

That’s supposed to be a problem. But that’s the whole point of a cap-and-trade program. That’s the whole mechanism for reducing emissions. Oil companies will get three — count ’em, three — options. They can pollute less; they can sell cleaner fuel; or they can buy pollution permits from other companies who will reduce their own pollution instead.

We can be flexible and creative about our approach, but there’s no free lunch. If we don’t reduce our climate pollution, we could be facing some unpleasant consequences. We know what the problem is, and we know how to fix it. The only question now is whether we have the spine for good policy.

Postscript: if you want to get down and dirty with Sightline’s argument for WCI’s appropriate scope, here’s the full monty.