RGGI faces critics of cap and trade

ALBANY — While the Regional Greenhouse Gas Initiative has been hailed widely as a milestone in efforts to reduce carbon dioxide emissions, not everyone agrees that a regional approach focused on carbon emitters is the proper way to fight the problem.

One expert sees two problems with the cap-and-trade model. He says it is too narrow in scope and should be applied to producers of carbon-based fossil fuels rather than those who emit carbon after burning those fuels.

Cary Coglianese is a professor of environmental law and policy at the University of Pennsylvania Law School. The current approach, of capping emissions, is "downstream" — that is, at the point where they enter the environment. This method causes administrative problems, he said, due to the number of emitters that need monitoring and concerns over how to determine if their reports are accurate.

"A better approach would be to do this upstream — to place the cap on production and sale of carbon-based fuels and allow people to trade in that market," Mr. Coglianese said. Rather than having "100 million different sources to monitor," subject to monitoring instead would be energy companies that produce oil, natural gas and other fossil fuel derivatives, he said.

"It would work the same way, like a bottleneck in a bottle," he said. "Companies would bid on how much they're allowed to produce. If companies have restrictions on what they can sell, if supply decreases, cost will increase, making non-carbon-based sources more attractive."

Mr. Coglianese also sees problems with the regional approach to cap-and-trade. Because carbon emissions are a global concern, regional methods to limit them may not carry much overall weight. He worries about "leakage" — that if one region succeeds in creating a strong emission control program, it will cause energy-intensive industries to move to less restrictive regions.

"I would worry that state and regional approaches may lull the public and policymakers into thinking that things are being well taken care of and thus they'll move on to more pressing matters," Mr. Coglianese said. "I know the argument about taking baby steps is better than nothing and will build support of national initiative. But it may lull people into thinking there's less need for national action."

Another potential problem is that too many regional systems could stymie the development of a broader national or international regime because of potentially conflicting ways of valuing credits and evaluating emissions.

"If a lot of companies are locked into their own regional initiatives, to the extent that those are incompatible with each other or the prospect of a broader solution, it may take longer to impose a broader solution," Mr. Coglianese said. "Different areas having different ways to calculate credits and emissions may make it harder to shift from downstream to upstream."

One New York official closely involved in guiding the state's participation in RGGI responded quickly when asked about Mr. Coglianese's "upstream vs. downstream" distinction.

"Why can't you do both?" asked Peter Iwanowicz, director of climate change at the state Department of Environmental Conservation and chairman of RGGI's auction committee.

He said the regional approach has evolved at the initiative of states like New York in the absence of federal leadership on mitigating the effects of climate change. "We've received kudos from around the globe," Mr. Iwanowicz said. "There are encouraging signs the RGGI model will be used elsewhere."

He offered the Western Climate Initiative, slated to begin operation in 2012 with seven U.S. states and four Canadian provinces as members, as an example. WCI will be broader than RGGI and will include other industrial sectors besides power plants.

Other political entities reportedly examining the mandatory regional cap-and-trade model include Florida, a group of Midwestern U.S. states and the European Union. In September, Gov. David A. Paterson said he eventually would like to combine RGGI with WCI. Recognizing this, Mr. Iwanowicz said that New York and the other RGGI states will have to address expansion, adding that experience will help determine which sectors might "fit in" with cap-and-trade and which might not.

"Our approach with RGGI is that you've got to crawl before you walk and walk before you run," Mr. Iwanowicz said. "We want to have the conversation on a regional basis and move forward. We don't want to go it alone — we've got momentum, interest and creative energy working in the same direction."

The RGGI is a cooperative effort by 10 Northeast and mid-Atlantic states to limit greenhouse gas emissions. The multistate environmental effort is the first mandatory, market-based carbon dioxide emissions reduction program in the United States.

In addition to New York, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Rhode Island and Vermont are signatory states to the RGGI agreement. These states have agreed to cap carbon dioxide emissions from the power sector, and then require a 10 percent reduction in these emissions by 2018.