Western Climate group sees carbon at $33/ton in 2020

SAN FRANCISCO (Reuters) - A cap-and-trade market to slow climate change in Western U.S. states and Canadian provinces expects carbon dioxide to trade for about $33 per ton in 2020, an economist for the group said on Wednesday, outlining highlights of a new, unreleased analysis.

California, Ontario and British Columbia are key members of the 11-state-and-province WCI, which aims to cut emissions 15 percent below 2005 levels by 2020 through the market system and complementary policies, such as energy efficiency regulation.

Cap-and-trade systems, already in place in Europe and the U.S. Northeast, place a cap on pollution and let power plants and other big producers of greenhouse gases buy and trade emissions credits. The systems count on market efficiency to drive pollution cuts for the cheapest price.

The WCI economic analysis, which is being finalized, projects carbon dioxide prices of $10 to $40 per ton in the first year of trade, 2012, rising to $20 to $80 by 2020, depending on the pace of economic growth, energy prices, and efficacy of energy efficiency and other measures, said British Columbia Climate Action Secretariat economist Jessica Verhagen, who is leading the economic analysis.

If all goes according to expectations and plan, the price is likely to be $33 per ton in 2020, she said in an interview. But if the economy grows faster than expected, with resulting increase in carbon output, and measures like energy efficiency do not meet expectations, carbon prices would rise toward the high end of the range, she said.

Prices in the European Union market are around $20 per ton.

U.S. senators are working on a climate change bill that could potentially stop regional and state cap-and-trade efforts, and California is debating whether to go ahead with its aggressive state climate change agenda, a law that is under attack in early debates ahead of the 2010 election.

Reporting by Peter Henderson; Editing by Richard Chang