US states are moving towards a cap and trade system for CO2 emissions

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Photo courtesy of AtomicShark at Flickr.com.

The Regional Greenhouse Gas Initiative held its second auction for carbon credits in December. This was the first auction where all 10 states in the initiative took part, and the sale price rose about 10 percent from the previous auction in September, 2008.

These carbon credits have some bite to them; the auction wasn’t just a public relations affair for the local utilities. The northeast is attempting to achieve a major shift in carbon dioxide emissions. Greenhouse gasses from power plants in these 10 Northeastern states are capped at current levels from January 1, 2009 until 2014. Then, the cap will drop 2.5% a year until 10% reductions are hit in 2018.

Now that the carbon cap is in effect, utilities that use coal or natural gas to generate electricity will have to buy carbon credits to offset their pollution. They are likely to pass along the cost to consumers, which will drive up the price of dirty electricity and help make alternative energy sources more competitive. Regional cap and trade systems have already proven effective at reducing Nitrogen Oxide emissions, and policy makers hope to have similar success with reducing carbon. Funds raised from the carbon auction are earmarked for efficiency improvements, building alternative power sources on government buildings, and eliminating emissions from non-powerplant sources.

The RGGI isn’t the only regional group working on a cap and trade system. In the middle of the country, the Midwestern Greenhouse Gas Reduction Accord is developing a system that will cover Minnesota, Michigan, Wisconsin, Iowa, Illinois, Kansas, and the Canadian Province of Manitoba. Other western states and Canadian Provinces formed their own group, the Western Climate Initiative. WCI membership includes Arizona, British Columbia, California, Manitoba, Montana, New Mexico, Ontario, Oregon, Quebec, Utah, and Washington State.

Some states are tackling emissions on their own. California passed laws in 2006 to reduce CO2 emissions by 20%, and is considering ways to extend the reach of those laws into neighboring states. California plans to roll out a Cap and Trade system by 2012, and the state budget crisis may accelerate the process. A carbon credit auction would raise desperately needed revenue for California, but there’s concern that the money would be squandered instead of spent on reducing emissions.

Federal action is also expected in the near future. The President-Elect, Speaker of the House, and other national leaders have publicly spoken in favor of a cap and trade system. In addition, the Environmental Protection Agency is facing pressure to treat CO2 as a pollutant. The EPA recently published an Advanced Notice of Proposed Rulemaking to regulate agricultural emissions of greenhouse gas.

Some surprising voices have also spoken out against cap and trade carbon systems. A small number of utilities and businesses who use large volumes of electricity have raised concerns about the costs, but some environmentalists are also skeptical of the concept. There’s a concern that carbon credits don’t actually reduce total emissions, and that flaws in the systems can allow polluters to play a shell game with their emissions. Another concern is that the system wont achieve it’s goals of reducing emissions. The cap and trade system in Europe has been plagued by politics and lobbying, and emissions have risen since it was introduced.

Even with these concerns, the US looks likely to move ahead on efforts to reduce carbon production. Many changes are on their way, and some will arrive sooner than others.

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Photo courtesy of bytepusher at Flickr.com.

Steven Ribeiro February 26, 2009 at 1:46 am

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