Nov/Dec 2009

State News: August 2009


cap and trade 101

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States Lead Efforts to Cut Carbon Emissions
When it comes to a cap and trade program, the federal government could learn a lot from the states.
Three regions—the Northeast, West and Midwest—have developed climate initiatives. The Regional Greenhouse Gas Initiative in the Northeast, a regional cap and trade initiative called RGGI for short, has been operating for a little more than a year and has held five auctions of allowances, which companies must purchase in order to emit carbon into the atmosphere.
State officials say their experience in dealing with the issue of reducing greenhouse gas initiatives should be taken into account in a federal program. The three regions of the country that have developed climate initiatives all include a cap and trade program of some sort, said Judi Greenwald, vice president of Innovative Solutions for the Pew Center on Global Climate Change, a nonpartisan organization formed to address climate change.
But she and others believe the best solution for the country—and the world—would be a unified program to address emissions.
“If you want to fix climate change, you have to cover everybody,” said Greenwald.
And that’s the ultimate goal, said Phillip Cherry, director of Policy and Planning for the Delaware Department of Natural Resources and Environmental Control.
“All the states knew when we started the process that a national program was really where we needed to be,” he said. “We created this regional program because there had been no federal leadership.”
Cherry believes RGGI could be a model for not only a national cap and trade program but the auction system it has established for the emission allowances.
He and others also believe states will continue to play an important role in reduction of carbon emissions if the federal legislation is approved. But they also believe the federal government should recognize the efforts the states have put forth.
The cost of an allowance under RGGI has been $2 to $3 a metric ton for the pollutant, according to Cherry, much lower than forecasts of the cost of allowances under a federal cap and trade program. But even with that modest fee, Northeastern states are reaping benefits of RGGI. Massachusetts alone has received more than $60 million in the first five allocations auctions and has plowed that money back into energy efficiency programs, said Commissioner Laurie Burt of the state’s Department of Environmental Protection.
“It really helps you put your money where your mouth is,” she said. “You’re jumpstarting that clean energy future by having early reductions in energy consumption and giving you much more of a manageable demand on energy.”
But that’s something states can do better than the federal government, state officials say. Plus, said Burt, states are involved in the regulatory end of rate-setting and establishing building standards. She said they’ll also play a role in implementing a cap and trade program.
But change is never easy, and Cherry said the process of redirecting a fossil-fuel based economy to one based on cleaner and renewable energy will be painful.
“Through the right structure of allowance auctioning and the right direction of these potential revenues, we can greatly mitigate the costs to consumers by making the consumers more energy efficient and reducing their costs of energy that way,” he said.
While RGGI is the only initiative to have held allowance auctions, more than half the states are involved in initiatives to establish a cap and trade program for carbon, either as a participant or an observer, according to the Pew Center on Global Climate Change. Florida in 2008 passed legislation enacting several new energy and climate change policies, and includes a cap and trade program statewide that could begin as early as 2010, according to the Pew Center. The South is the only region that does not have a cap and trade system in progress.
Pennsylvania Rep. Chris Ross, whose state is an observer for RGGI in developing a cap and trade program, said it’s important for Congress to recognize the state efforts.
“Credit for the work they’ve done needs to be factored in,” said Ross.
In addition, Ross said, Congress needs to recognize that nearly all the states have taken action on alternative energy production, and that should be taken into account in a federal law.
“Hopefully we’re going to do some things at the state level that will benefit society as a whole and not come in conflict with whatever the federal government ultimately decides to do,” Ross said.
—Mary Branham
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