A Carbon Market
THE WHITE HOUSE and Congress ought to take note of what will happen in six states today. Whereas they were unable (Congress) or unwilling (the White House) to exert the necessary leadership to put a price on carbon as part of a larger effort to cut greenhouse gas emissions and reduce the nation's dependence on fossil fuels, the Regional Greenhouse Gas Initiative (RGGI) will do just that by selling allowances to power plants in the nation's first cap-and-trade system.
The RGGI was formed in 2005, with Maryland signing on last year. The states taking part in today's online auction of 85 percent of available allowances for calendar year 2009 are Maryland, Connecticut, Maine, Massachusetts, Rhode Island and Vermont. Delaware, New Hampshire, New Jersey and New York are still devising their rules. The Empire State will join the auction set for Dec. 17. The other three will take part in the 2009 sale. The overall goal is to cap emissions at 188 million tons a year through 2014, and then to reduce them by 2.5 percent each year, resulting in a 10 percent reduction below the cap by 2018.
The RGGI is one of three regional associations of states that have been formed to institute cap-and-trade programs based on the successful system devised to reduce emissions of sulfur dioxide, which causes acid rain. The Midwestern Regional Greenhouse Gas Reduction Accord includes Minnesota, Wisconsin, Illinois, Iowa, Michigan and Kansas and the Canadian province of Manitoba.
Arizona, California, Montana, New Mexico, Oregon, Utah and Washington, plus four Canadian provinces, formed the Western Climate Initiative in February 2007. On Tuesday, the WCI announced the outline of its cap-and-trade plan for power plants, manufacturers and vehicles that aims to reduce greenhouse gas emissions 15 percent below 2005 levels by 2020. With their multisector approaches, the Western and Midwestern compacts are more ambitious than RGGI. But today's RGGI auction will move cap-and-trade from theory to reality. Everyone will be able to see how the system works and doesn't work and adjust accordingly. We hope that it serves as a reminder to Washington of what can be accomplished when vision and leadership are exercised.