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Market News

 October 24, 2007
NY to cap and trade greenhouse gas!

 (By David Ehrlich - clean Tech) - The governor unveiled regulations for power plants, as more than a dozen states prepare to sue the EPA for blocking car emission reductions. New York Gov. Eliot Spitzer released draft regulations today that would implement a cap and trade carbon credit system for power plants in the state.

The program is designed to cut 16 percent of greenhouse gas emissions in the state by 2019.

"Under the agreement, annual emissions of CO2 from New York power plants will be capped at 64 million tons from 2009 until 2014, and after that the cap will be reduced by 2 1/2 percent per year until 2019," Spitzer said at a news conference in Brooklyn.

The new rules are the first to be unveiled as part of the Regional Greenhouse Gas Initiative backed by 10 Northeastern states. The regulations would cover approximately 90 plants, 15 of which are coal, according to the governor's office.

"Without RGGI, total power plant emissions are projected to increase 25 percent by 2019," he said.

In addition to putting emissions caps on power plant owners, Spitzer is reportedly joining more than a dozen other states in a planned lawsuit against the U.S. Environmental Protection Agency.

Led by California, the states are expected to sue the agency for delaying efforts to regulate emissions from cars and trucks. California first applied for a waiver to implement the regulations in December 2005.

The suit was expected this week, but was put on hold while California Gov. Arnold Schwarzenegger deals with the wildfire crisis in his state.

Under the regulations announced today, New York does not plan on giving away allowances to power plants, but is advocating auctioning off 100 percent of its pollution allowances, a strategy Spitzer said most other RGGI states would likely follow.

The governor said power plants pump out 25 percent of the total annual carbon dioxide emitted in New York state.

Plant operators would need to buy enough carbon credits or allowances, one allowance per ton of emissions, to cover the plant's emissions in a program similar to one that helped reduce acid rain in the state.

The governor's office said proceeds from the auction would go toward energy efficiency programs and renewable energy projects.

At least one power company is on board with Spitzer's new program.

David Manning, exec. VP at Westborough, Mass.-based National Grid USA, said in a statement, "As owner of over 6,500 megawatts of primarily low carbon natural gas powered generation in New York, we have actively supported the RGGI process since its inception."

National Grid USA is a subsidiary of London's National Grid (NYSE: NGG), the sole owner and operator of the electricity transmission system in England and Wales.

"We understand the urgency of addressing climate change and have established our own goal to reduce our worldwide greenhouse gas emissions 60 percent by 2050," said Manning.

The caps under the draft regulations would affect plants 25 megawatts and larger. Spitzer said older, less efficient power plants with higher emission levels would end up paying more to comply with RGGI than newer, more efficient units.

"Dirty generators will be at a competitive disadvantage, and there will be a new incentive to build clean, efficient or renewable generation," said the governor.

Power companies would also be able to use offsets to account for up to 3.3 percent of their overall emissions, using greenhouse gas emission reduction projects from outside the electricity sector, such as tree planting or landfill gas recapture.

The other states in the initiative are Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New Jersey, Delaware and Maryland.

"We would love to see the federal government embrace this concept, we would love to see the federal government adopt a national policy of cap and trade that perhaps would eliminate our need to do it at a state or local level," said Spitzer.

"Until that moment occurs, however, we will continue to do what we've done for many years, which is to, we think, lead the way with policy that will pursue the public interest, protect the environment, ensure the health of our children, and, frankly, the health of the entire planet."

There's a 60 day public comment period on the New York regulations that ends on Dec. 24.

The governor expects the rules to be adopted by spring of 2008, with auctions starting in the summer.