States Want Cap-and-Trade Added to U.S. Carbon Rules

U.S. states with cap-and-trade laws want the Obama administration to add their carbon markets into new federal greenhouse-gas regulations, a California environmental official said.

State-run carbon-trading programs should be “treated as equivalents or substitutes” for Environmental Protection Agency regulations for emissions tied to global warming from power plants, oil refineries and factories, Mary Nichols, chairman of the California Air Resources Board, said yesterday in a telephone interview.

“It would be a way to make sure that industries in our state are not being penalized by being regulated by EPA on top of what the state is doing,” Nichols said.

California plans to start a cap-and-trade program in 2012 and it may be expanded into a regional carbon market that includes New Mexico and the Canadian provinces of British Columbia, Ontario and Quebec. A group of 10 Northeastern U.S. states already has such a trading program for power plants.

Officials from the states and provinces are considering whether to link the programs into a single North American carbon market following the defeat of cap-and-trade legislation in the U.S. Congress this year.

The federal plan, backed by President Barack Obama, aimed to cut U.S. greenhouse-gas emissions 17 percent from their 2005 level by 2020. The program would have issued a declining number of carbon dioxide allowances that companies would buy and sell.

‘Best-Available’ Technology

Without a federal carbon market, Obama’s EPA has issued regulations that will require new or expanded industrial plants to use the “best-available” technology to curb greenhouse gases starting next month. State environmental agencies would decide on a case-by-case basis which technology a company should use to meet the standard, EPA officials have said.

States “are going to be pushing” the EPA to go further and make regional carbon-trading programs “approvable” under the federal Clean Air Act, Nichols said. Officials from the state cap-and-trade programs “seriously raised” the proposal with EPA officials for the first time at a meeting in Washington this week, she said.

“There’s really no history of anything quite like this being done before, so there’s a lot of new ground to be broken,” Nichols said.

EPA Assistant Administrator Gina McCarthy attended the meeting and told the state officials “if they have ideas, they should send them in,” Brendan Gilfillan, an agency spokesman, said in an e-mail. He declined further comment on the proposal.

EPA’s ‘Tough Fight’

The EPA faces a “very tough fight” to prevent its greenhouse-gas regulations from being overturned after Republicans won control of the U.S. House of Representatives and narrowed Democrats’ Senate majority in elections last month, Natural Resources Defense Council president Frances Beinecke said Nov. 15.

Republicans and some Democrats in Congress have tried to abolish or delay EPA’s greenhouse-gas regulations, which they argue will be a drag on the U.S. economy as it recovers from the worst recession since the Great Depression.

Those efforts will continue when the new Congress is seated next month, partly because the EPA might use cap-and-trade programs on the East and West coasts to “stitch together” the national carbon market that couldn’t get through Congress, said Robert Dillon, a spokesman for Republican members of the Senate Energy and Natural Resources Committee.

Rest of the Country

“If California wants to disadvantage itself economically, that’s up to California, but it shouldn’t be allowed to force the rest of the country to go along with it,” Dillon said in a telephone interview.

State officials who worry about “double regulation” of companies under their cap-and-trade programs and the EPA’s technology rules can drop the carbon market, said Allison Wood, a partner at law firm Hunton & Williams LLP who represents a power-plant owner that opposes New Mexico’s greenhouse-gas limits.

The EPA has said its new carbon regulations will help rather than hurt the economy by spurring investment in energy- efficiency upgrades and new technologies that cut pollution.

(Updates with comment from EPA spokesman in 10th paragraph, Republican spokesman in 13th.)
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