Rules Set For First State Co2 Cap/Trade Program
The seven Northeast states participating in the first U.S. multi-state program to reduce harmful climate changing emissions from power plants have released a model set of regulations to be proposed in each state to implement the program.
The Regional Greenhouse Gas Initiative (RGGI) creates a mandatory carbon dioxide emissions cap, combined with a market-based trading system that rewards innovative companies for quick action and lowers overall costs.
This is the first mandatory cap-and-trade program for carbon dioxide (CO2) emissions in U.S. history. The states participating in RGGI are: Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont. The state of Maryland recently adopted legislation requiring Maryland to join RGGI by June 2007.
The agreement caps power plant emissions at current levels beginning in 2009 and starts ramping down the limit in 2015, giving companies ample time to prepare for the new targets. By 2019, targets will be set 10 percent below current emissions.
Estimates project that average household bills could increase by approximately $3-21 annually above what they otherwise would have been. But the deal includes innovative measures to protect consumers, who can expect to see less pollution as well as lower energy bills due to new investment in energy efficiency.
“Elected officials all across the country should be watching what these governors have accomplished by setting aside political rhetoric and getting down to the business of real global warming solutions,” said Dale Bryk, an attorney at the Natural Resources Defense Council who has been closely involved in the process.
“What they are doing here is going to set a sensible, achievable pace for the rest of the country, and create a new wave of investment in cleaner, more efficient energy technologies,” said Bryk.
Under the cap-and-trade program, the states will issue one allowance, or permit, for each ton of CO2 emissions allowed by the cap. Each plant will be required to have enough allowances to cover its reported emissions. The plants may buy or sell allowances, but an individual plant’s emissions cannot exceed the amount of allowances it possesses.
The total amount of the allowances will be equal to the emissions cap for the region. Coal, oil and gas-fired electric generating units with a capacity of 25 megawatts or more will be included under RGGI.
The RGGI states have agreed that at least 25 percent of a state’s allowances are to be dedicated to strategic energy or consumer benefit purposes, such as energy efficiency, new clean energy technologies and ratepayer rebates. A power plant also could purchase these allowances for its own use. The funds generated from these sales will be used for beneficial energy programs.
The RGGI program allows power plants to utilize offsets. These greenhouse gas emission reduction projects from outside the electricity sector may account for up to 3.3 percent of their overall emissions. Offset projects provide generators with additional flexibility to meet their compliance obligations at the lowest cost.
A power plant owner/operator will be allowed to select the lowest cost emission reductions and apply them to a portion of the plant’s emissions requirement. Examples of offset projects include: natural gas end use efficiency, landfill gas recovery, reforestation, and methane capture from farming facilities.
Offset credits may come from anywhere in the United States, provided offset projects from outside of the participating states must take place under the regulatory watch of a cooperating agency in that state.
In December 2005, the governors from the seven states entered into a memorandum of understanding specifying the general framework of the program. On March 23, 2006, the states released draft model regulations that outlined proposed specific requirements for the program. The draft rule was the subject of a 60-day comment period and two public meetings were held.
The model set of regulations released August 15 reflects and incorporates many of the comments received and provides detailed rules for the program. Each state will use the model rule as a starting point for obtaining legislative or regulatory approval of the program.
Provided by the Environmental News Service.