Seven Northeastern States Set Greenhouse Gas Limits

The seven states agreed in December to create a mandatory program to curb emissions, and they set the reduction targets in draft regulations released today. Owners of power plants fueled by coal, oil and natural gas would begin to cut their carbon dioxide output in 2009. The program would be the first government regulation of greenhouse gases in the U.S.

``They're hoping other states will opt in and that it gains momentum to become a national model,'' said Jason Patrick, manager of greenhouse gas trading at Evolution Markets, a broker of environmental allowances and credits in White Plains, New York. Trading of greenhouse gas credits could begin as soon as states adopt the plan, he said.

New York Governor George Pataki initiated the regional plan last year to spur federal action on climate change. The Bush administration in 2001 rejected the Kyoto Protocol, an international treaty to reduce carbon emissions, saying it was too costly and didn't place limits on developing nations.

State legislatures or regulatory agencies still must adopt the regulations that establish the 10 percent reduction target. The other states in the program, called the Regional Greenhouse Gas Initiative, are Connecticut, Delaware, Maine, New Hampshire and Vermont. Maryland passed legislation that requires it to join the group by next June.

The states would ensure that utilities limit their emissions to a total of 121 million tons a year starting in 2009 and then reduce the number of allowances available to each power plant larger than 25 megawatts starting in 2015.

Utility owners such as Duke Energy Corp. and Exelon Corp., the two biggest in the U.S., have called for federal regulation of carbon emissions to help guide power-plant development. Power plants emit 39 percent of all U.S. carbon emissions, according to the Natural Resources Defense Council.

Utilities heavily invested in nuclear power and renewable energies such as wind and solar likely would benefit from carbon caps, while those with mostly coal and natural gas would need to buy emission allowances to keep their plants running. Exelon is the biggest owner of U.S. nuclear plants.

Europe is already trading greenhouse gas emissions under the Kyoto plan. In the U.S., utilities trade allowances for the emission of sulfur dioxide and nitrogen oxides, pollutants that contribute to acid rain and smog and are regulated under the federal Clean Air Act.

To contact the reporter on this story:
Christopher Martin in New York at
cmartin11@bloomberg.net.