Bloomberg News

U.S. Coal Rules May Allow State CO2 Markets: Forrister

July 13, 2012

The U.S. may allow states to regulate emissions from existing coal-fired power plants using carbon markets, according to the president of the International Emissions Trading Association.

The nation’s Environmental Protection Agency is set to let states including New York and California regulate emissions in their own way rather than via a federal power station emission standard, assuming President Barack Obama wins a second term in office, said IETA president Dirk Forrister, a former climate adviser to U.S. President Bill Clinton.

Federal cap-and-trade legislation stalled in the U.S. Senate after narrowly passing the House of Representatives in 2009. Still, California’s trading program is planned for next year and Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont formed the Regional Greenhouse Gas Initiative in 2008.

“A state could propose a cap-and-trade as an alternative,” Geneva-based Forrister said July 9 in an interview in London. Power utilities didn’t want a patchwork of 50 carbon-reduction programs, “but that may be happening.”

In announcing the first rules for carbon dioxide from future power stations in March, EPA Administrator Lisa Jackson dropped a pledge to issue rules for existing plants, saying the agency had “no plans” to develop those regulations.

As part of a legal settlement with environmental groups including the Natural Resources Defense Council and the Sierra Club, and states such as Massachusetts and Connecticut, the EPA agreed in December 2010 to regulate carbon-dioxide emissions from electricity plants. The EPA missed a September deadline to issue those rules.

Legal Right

Last month, the U.S. Court of Appeals in Washington ruled that the EPA acted properly when it concluded that greenhouse gases are pollutants that endanger human health, and opponents don’t have a legal right to challenge rules determining when states and industries must comply with regulations curtailing such emissions.

These states may be among those seeking to use their markets to control emissions from existing fossil-fuel stations, Forrister said. Coal-burning states including Kentucky and Ohio are unlikely to adopt carbon markets in order to comply with federal measures, he said.

Washington state and Oregon both have coal stations that they plan to shut, John Coequyt, the San Francisco-based Sierra Club’s senior representative for climate change, said in an interview on July 11. “I would bet the EPA would be fairly open” to carbon markets.

Spending Proceeds

Markets have the benefit of providing funds from emission allowances sold, Coequyt said. States in the so-called RGGI program spent about 52 percent of proceeds to boost energy efficiency, according to a report published by the market’s administrator last year.

RGGI states have raised more than $1 billion from selling the permits, according to the market’s website.

Should Mitt Romney win presidential office this year, there’s “almost no chance” he will put in place a carbon- emissions standard for existing stations, Coequyt said.

The EPA’s proposal on March 27 would cap emissions for plants built in the future at 1,000 pounds per megawatt hour, a level a modern natural gas-fired plant can meet. Coal plants would require expensive carbon-capture technology, which industry groups say isn’t commercially available.

In the European Union, carbon allowances for December dropped 40 percent in the past year as the region’s financial crisis curbed demand and governments handed out too many free permits. They fell as much as 2.6 percent today to 7.46 euros ($9.13) a metric ton on the ICE Futures Europe exchange in London.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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