Climate Bills and a Green Economy

States to Lead Carbon Markets as Federal Plan Stalls

January 7, 2010

Bloomberg - State government actions are likely to dominate the emerging U.S. carbon market in 2010 amid doubts that Congress will pass an emissions trading law this year.

While cap-and-trade legislation, which would create carbon dioxide permits that companies could buy and sell, is stalled in the U.S. Senate, a group of Northeastern states already has a carbon market and two more regional programs in the Midwest and West plan to follow suit.

Regional-level carbon trading “is where the action is going to be” this year, Bill Becker, executive director of the National Association of Clean Air Agencies, which represents state and local environmental regulators, said in an interview.

“The states are juiced to expand their programs,” Becker said. “They don’t like the slow pace that we’re seeing in the federal government, and they’re not confident that anything meaningful is going to necessarily pass.”

Under cap-and-trade, the government issues a limited number of permits, also called allowances, each carrying the right to emit one ton of carbon dioxide.

The Regional Greenhouse Gas Initiative, a cap-and-trade program for power plants from Maryland to Maine, enters its second full year with a surplus of permits that pushed their price down 41 percent in 2009.

The Northeastern states decided in 2005 how many permits to issue, leaving some room for emissions to rise. Instead, emissions fell as the economy slowed. Permits for December delivery rose 3 cents, or 1.3 percent, to $2.28 today on the Chicago Climate Futures Exchange.

Watching Demand

Demand for the permits this year will depend on economic growth and the price of natural gas, the cleanest fossil fuel, Peter Shattuck, a research analyst at Rockport, Maine-based advocacy group Environment Northeast, said in an interview.

Permit prices also depend on the minimum bid in the carbon trading program’s quarterly allowance auctions, he said.

While no change to last year’s minimum bid of $1.86 is planned for the next auction in March, the price may yet be increased “so that states can attempt to maintain a revenue stream,” Shattuck said. Past auction results would support a new minimum bid of $2.33, he said.

Two other regional carbon markets, the Western Climate Initiative and the Midwestern Greenhouse Gas Reduction Accord are being designed. They aren’t scheduled to start until 2012.

To meet that deadline, the states involved in the new programs must make “detailed decisions” this year about which companies to regulate, the number of permits to sell at auction and how many should be given away, Shattuck said.

Delayed Action

The U.S. House passed a cap-and-trade bill in June that would suspend state-run carbon markets in 2012 and absorb their carbon dioxide allowances into the new federal program. Senate Democrats delayed action on cap-and-trade until 2010 amid criticism of the plan from Republicans and some Democrats.

The “bruising fight on health care” hasn’t helped the chances for quick action on a cap-and-trade bill, Frank O’Donnell, president of Washington-based environmental group Clean Air Watch, said in an interview.

It might “take a little time” before senators “are ready to take another bone-crushing type of vote,” O’Donnell said.

Even if cap-and-trade legislation is approved this year, it’s unlikely the Environmental Protection Agency could complete the regulations needed for the carbon market to function by 2012, Roger Martella, former general counsel at the EPA under President George W. Bush, said in an interview.

The EPA would probably need three to five years of lead time, leaving regional programs as an option for “those who want to play in some kind of trading system,” said Martella, a Washington-based partner at law firm Sidley Austin LLP.

‘On the States’

If Congress doesn’t pass a national carbon trading plan “the initiative to the extent that it still exists is going to be entirely on the states,” Jonathan Cannon, a University of Virginia School of Law professor and former EPA general counsel during the Clinton administration, said in an interview.

Regional carbon trading programs are likely to face legal challenges from industry and states without matching greenhouse gas regulations. Last year, a New York power plant filed a lawsuit challenging the legality of the Northeast carbon market on the grounds it unlawfully interferes with the federal government’s authority to regulate interstate commerce.

North Dakota Sues

While that case was recently settled, North Dakota Attorney General Wayne Stenehjem is now considering legal action against regulators in neighboring Minnesota, a member of the Midwest’s proposed emissions trading program, over plans to include carbon price estimates in future electricity purchasing decisions.

Power plants in coal-rich North Dakota that sell electricity into Minnesota would be hurt by the proposal, Stenehjem, a Republican, said in an interview.

“If anything is going to be done to regulate carbon and if that needs to be done, it’s only going to work if it’s done on a national basis,” he said.

The U.S. Chamber of Commerce, which filed a friend-of-the- court brief in the New York case, will continue to oppose “a patchwork of state and regional regulations” on greenhouse gases, Robin Conrad, the organization’s chief lawyer, said in an e-mail.

Cap and Trade Scam to be Enforced at State Level
Globalists intent on ushering in a zero-growth post-industrial society are bypassing the federal government’s stuttering efforts to implement the cap and trade scam and going directly to the states in an effort to impose their control freak tax on the very life-giving gas that we all exhale – carbon dioxide.