Carbon Cap-and-Trade Moves Forward
The Regional Greenhouse Gas Initiative (RGGI), made up of 10 eastern states, announced that the first auction of carbon dioxide emissions allowances will take place on September 10, 2008, with a second auction on December 17, 2008. Currently, the RGGI initiative applies only to power plants. Member states have agreed to implement an emissions allowances program to stabilize emissions by 2014 and then reduce emissions by 2.5% each of the next four years.
Concurrently, the U.S. Environmental Protection Agency issued an economic analysis of the Lieberman-Warmer Climate Security Act of 2008, which if passed would implement a national carbon cap-and-trade system. EPA concluded that the bill would reduce greenhouse gas emissions to 11% below 1990 levels by 2030 and to 56% below 1990 levels by 2050, while only reducing GDP growth during the same period by about 1%. The EPA also concluded that the bill would cause electricity prices to rise by 44% by 2030, but it notably did not evaluate the economic benefits of greenhouse gas reductions that would result in savings to consumers significantly offsetting the increased price of electricity.
Both these developments are promising steps toward meaningful control of carbon emissions. The practical progress being made by RGGI shows that a cooperative spirit can result in a workable carbon emissions reduction program, and the EPA study shows that the economic sky will not fall by doing so.
Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.
