(Corrects second paragraph to say that the states are expected
to lower the cap, instead of have agreed to lower the cap.
Changes order of words in headline.)
By Valerie Volcovici
WASHINGTON Feb 6 States involved in the
developing northeastern U.S. carbon market are expected to
announce on Thursday that they will reduce the program's
emissions cap as a way to stimulate allowance trading and
strengthen its environmental goals, according to the Natural
Resources Defense Council.
The Regional Greenhouse Gas Initiative's (RGGI) nine member
states are expected to lower the market's carbon cap to as low
as 91 million short tons from the current level of 165 million
for the next phase, which will run from 2014 to 2017, said Dale
Bryk, an attorney for the Natural Resources Defense Council
(NRDC), which is a RGGI stakeholder and observer.
The regional initiative is the first market-based regulatory
program in the United States that has a goal of reducing
greenhouse gas emissions.
States sell emission allowances, mostly through auctions,
and the proceeds are used to fund energy efficiency and
renewable energy projects.
RGGI is a cooperative effort among the states of
Connecticut, Delaware, Maine, Maryland, Massachusetts, New
Hampshire, New York, Rhode Island, and Vermont.
An RGGI official confirmed that an announcement is pending
but could not provide details.
Most power plants in the RGGI states currently have no
incentive to trade in the nascent carbon market because the
region's emissions fall well below the current cap, which had
been set based on projections made in 2005.
The cap had been set higher back then because natural gas
prices were around $8 and the economy was booming. But when the
market began trading at the end of 2008, natural gas prices and
the economy sank, which lowered carbon emissions.
The cap reset is one of a number of changes that the program
is expected to announce on Thursday, Bryk said.
She said the states are also expected to announce that they
will raise the minimum bid price for allowances to over $3 per
ton from the current level of $1.93.
State officials have been reviewing the program for over a
year. Consultancy ICF International modeled scenarios looking at
what would happen if the original 2014 cap was reduced to 97
million tons or 91 million tons.
Emissions from the roughly 160 power plants covered by the
program last year were projected to come in at about 91 million
tons, the new level agreed by the RGGI states.
There has been growing pressure by state lawmakers and
emissions traders to tighten the cap.
Andrew Cuomo, the governor of New York, the initiative's
biggest emitting state, this week called for RGGI to tighten its
cap during his annual "State of the State" address, in which he
outlined his policy priorities.
The NRDC's Bryk said the announcement will send an important
signal to other states that have not yet set mandatory carbon
emission limits or set a price on carbon emissions.
California is the only other state to have in place a
mandatory carbon cap-and-trade system. While RGGI covers the
northeastern U.S. electric sector, California's market plans to
cover over 80 percent of the state's economy.
Actions taken by these states are going to be important in
the coming years as the U.S. Environmental Protection Agency
begins to regulate greenhouse gas emissions from the country's
existing fleet of power plants.
While the EPA is expected to set a national standard, it
will likely be up to the states to come up with plans to comply
with that target.
(Reporting By Valerie Volcovici; additional reporting by Rory
Carroll in San Francisco)