August 24, 2005

Nine States Plan to Cut Greenhouse Gas Emissions

NEW YORK -- Officials in nine Northeastern U.S. states have come to a preliminary agreement to cap and later reduce greenhouse gas emissions from power plants, the New York Times reported on Wednesday, citing a confidential draft proposal.

If the agreement is made final, it would be the first of its kind in the United States. The United States refused to sign the Kyoto Protocol, a greenhouse gas reduction plan that has been adopted by more than 150 other countries.

Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont came together in 2003 to form a coalition, known as the Regional Greenhouse Gas Initiative, in order to explore a market-driven cap-and-trade system for carbon dioxide emissions in the absence of mandatory emissions reductions at the national level.

Under the plan, carbon dioxide emissions would be capped at 150 million tons a year, about equal to the average emissions in the highest three years between 2000 and 2004, the paper said. In 2015 reductions would be required, which would reach 10 percent in 2020.

Representatives for the nine states were not immediately available for comment.

Once a final agreement is reached, the legislatures of the nine states will have to ratify it, which is considered likely, the Times said.

Scientists believe that carbon dioxide and other greenhouse gases cause global warming that is affecting coastal areas, icebergs and wildlife. Around 40 percent of U.S. carbon dioxide emissions come from fossil fuel power plants.

An emissions control program would likely cause higher energy prices for power company customers in the Northeast. The Times said that officials hope to offset rising prices with subsidies and support for the development of new technology.

These subsidies would be paid for through the sale of emission allowances to power producers, the paper said.

In cap-and-trade markets, businesses must either trim emissions under set limits or buy credits from companies that have complied with those limits.

Companies that would be affected by emissions limits in the Northeastern states include AES Corp., Public Service Enterprise Group Inc., Dominion Resources Inc., Pepco Holdings Inc., Dynegy Inc. and NRG Energy Inc.

NRG said that anything less than a national emissions reduction program "will serve only to introduce skewed incentives into the marketplace while having a diluted effect at best on reducing overall CO2 emissions."

PSEG also raised concerns about the possibility that the plan might include the sale of allowances to power plants, as opposed to being distributed to companies based on their previous emissions.

"That in effect would be taxing emissions from a specific segment of the economy," said PSEG spokesman Neil Brown. "Achieving the targets would be economically challenging in and of itself without adding a surcharge for emissions allowances."