States may try to create carbon market

Simon Lomax, Bloomberg News · Wednesday, Dec. 1, 2010
WASHINGTON - California, New Mexico and 10 U.S. Northeastern states may try to create a North American carbon market on their own now that President Barack Obama has given up on cap-and-trade legislation that stalled in Congress.

The emissions-trading system would be based on a planned carbon market in California, the most populous state, and an existing regional cap-and-trade program for power plants in the Northeast, according to state environmental officials. Three provinces -- British Columbia, Ontario and Quebec -- have also shown interest in a cross-border carbon-trading system, the officials said.

"The key is to have as large and as liquid a market as possible," John Yap, B.C.'s Minister of State for Climate Action, said in an interview. Under cap-and-trade, the government creates a market for pollution rights by issuing a limited number of carbon-dioxide permits, which companies can buy and sell.

The prospects for a North American market got a boost Nov. 2 when voters in California rejected a ballot measure that would have delayed that state's global-warming laws. Talks that began last year, as cap-andtrade legislation backed by Mr. Obama faltered in the U.S. Congress, will resume when state environmental officials meet in Washington this week.

The states and provinces weighing a unified carbon market represent about one-third of the combined US$15.5-trillion U.S. and Canadian economy, according to government statistics and the International Monetary Fund.

After Republicans won control of the House and narrowed the Democrats' Senate majority in the Nov. 2 mid-term elections, Mr. Obama said cap-and-trade "was just one way of skinning the cat" and that he doubts it could pass Congress until 2013 at the earliest. In Canada, the federal government has said it won't set up its own cap-and-trade program unless the United States does.

A carbon market established without the support of the U.S. and Canadian governments would probably "stick pretty close to the Atlantic and Pacific coasts and not venture too far inland," Ethan Zindler, a Washington-based analyst with Bloomberg New Energy Finance, said in an interview.

Such a cap-and-trade system may cover more than 800 million metric tonnes of carbon dioxide a year, making it about one-third the size of Europe's cap-and-trade program, according to New Energy Finance estimates.

California plans to start a cap-and-trade program in 2012. It may be joined by New Mexico as well as the three provinces, which also have cap-and-trade laws, according to California officials. Links to the Regional Greenhouse Gas Initiative, a trading program covering 10 states in the Northeast, are also being explored, said Mary Nichols, chairwoman of California's Air Resources Board.

"Nobody, including us, wants to be alone in implementing a cap-and-trade program," Ms. Nichols said on a conference call after the defeat of the ballot measure.

The 10 states in the Northeast have been auctioning carbon-dioxide permits, or allowances, since 2008. The Regional Greenhouse Gas Initiative's quarterly auctions have raised US$729-million so far.

Revenue from the auctions is falling because power plants are producing less electricity in the weak economy and need fewer carbon allowances. Auction revenue from the first three-quarters of this year fell 18% and some allowances have gone unsold, according to data from the regional cap-andtrade program.

The rules of the Northeast's cap-and-trade market are scheduled for review in 2012.

Read more: http://www.nationalpost.com/todays-paper/States+create+carbon+market/3908727/story.html#ixzz16qzUBZhZ

RGGI states to lose billions under US Senate bill, study finds /// PLatts

Washington (Platts)--8Jun2010/554 pm EDT/2154 GMT
The ten states comprising the Regional Greenhouse Gas Initiative stand to lose nearly $3 billion in revenue if the recently announced US Senate climate change bill becomes law, according to a study released Tuesday by environment research and advocacy group Environment Northeast.

The Senate bill, sponsored by Senators John Kerry and Joseph Lieberman, would eliminate any regional or state cap-and-trade programs when a national plan takes effect in 2013. At present, the only mandatory greenhouse gas cap-and-trade plan in the US is RGGI, a venture binding ten Northeast and Mid-Atlantic states.

RGGI emission allowances are mostly sold by state governments in quarterly auctions. Seven auctions have been held thus far, raising over $582 million since September 2008. The Kerry-Lieberman bill, however, would permanently end these auctions.

Environment Northeast estimates that RGGI member states would be forced to surrender more than a billion allowances between 2013 and 2018, the year in which the RGGI program is scheduled to end. These allowances would be worth at least $2.97 billion, Environment Northeast calculates, using the weighted
average of the seven prior auction clearing prices, or $2.75/short ton.The upper limit these allowances might be worth is $8.65 billion, the study stated. That would happen if allowances reach $10/st, which is the
maximum price that RGGI allowances are likely to trade during this time period, according to Peter Shattuck, a carbon markets policy analyst at Environment Northeast.

--Geoffrey Craig, geoffrey_craig@platts.com