Obama's Climate Rule Seen Heralding U.S. Greenhouse Gas Markets

  • Dozens of states are discussing plans for carbon markets
  • Utility group says climate rule has eased reliability concerns

U.S. states from the Pacific coast to the Midwest may allow companies to trade the right to emit global warming pollution, spurred on by the Obama administration’s new climate change rules.

Dozens of states, including a group of 13 in the western U.S. and a 15-state group in the Midwest, are discussing markets for emissions linked to climate change, Dirk Forrister, president of the International Emissions Trading Association, said in an interview Thursday at a conference on pollution trading in New York.

The rules, designed to cut greenhouse gas emissions, “have really given states a lot of new options to consider," Forrister said.

Power-industry executives, regulators and clean-air advocates told the conference the regulations, unveiled last month, will encourage states and regions to form greenhouse gas markets.

The rules are “a major step forward in moving toward an emissions trading program for the country," Jared Snyder, an assistant environmental commissioner for New York State, said during a panel discussion.

California and nine northeastern states already trade pollution rights. New York, part of the northeast market, is advising other states interested in following the model, Snyder said.

Easy Options

Under carbon markets in Europe, parts of the U.S. and China, large emitters such as factories and power plants may either take measures to cut pollution or buy surplus greenhouse-gas credits from others.

While the federal government won’t force states to adopt trading plans, the regulations are designed to make the option as easy as possible, Joseph Goffman, an associate assistant administrator at the Environmental Protection Agency, said at the conference.

“We think that’s the best way to create an investment environment, an operating environment, that gets you the reductions, the innovations we want, and all at the lowest cost," Goffman said.

GOP Opposition

A group of western states from California to the Dakotas and another led by the Minneapolis-based Great Plains Institute are discussing emissions markets, Forrister said. They’re taking steps even as states and companies that reply on coal, the dirtiest fossil fuel, press lawsuits challenging President Barack Obama’s plan. Most of the Republicans running to succeed Obama have vowed to undo the regulations if elected in 2016.

Obama and close to 40 heads of state will meet at the United Nations in New York on Sunday to push forward negotiations on a global agreement to rein in greenhouse gases. The power plant rule, a key part of U.S. efforts to cut emissions, includes a model trading plan for states and offers credits toward emissions targets for utilities that embrace clean energy projects.

“What they’ve done here is provide a lot of pathways to have flexibility to move credits and allowances across state lines," said Bob Perciasepe, president of the Center for Climate and Energy Solutions and a former EPA deputy administrator. “What we have here is a breakthrough to really move the country in that direction."

Paris Talks

The rules offer utilities cost-effective options to switch to new power sources, said Brian Wolff, an executive vice president for the Edison Electric Institute, a Washington-based trade group for investor-owned utilities.

“There was a lot of flexibility there," Wolff said at the conference. “When you look where the assets are as far as clean energy goes, we needed a way to push that forward, and I would say they found a way to do that.”

Pollution trading is expected to gain traction if world leaders can negotiate a global warming pact in Paris in December, the World Bank said in a report Sunday. Thirty-eight countries and regions will have carbon-pricing systems by 2017, covering about 12 percent of global emissions, up from 5 percent in 2011, the bank said.

Before it's here, it's on the Bloomberg Terminal.