RGGI Chair Says States Won’t Leave Emissions Trading Market for California, Quebec

California and Quebec, which together created the largest carbon market in North America this year, may come away empty-handed as they woo northeastern U.S. states to join their system.

States including Vermont, which Quebec’s premier said yesterday is particularly interested in uniting, are members of a Northeast group that has been operating an emissions-trading system since 2008. And they’ve shown no signs of abandoning that cause, said Kelly Speakes-Backman, chair of the Regional Greenhouse Gas Initiative known as RGGI.

“We’ve had no discussion of any states leaving RGGI, either to go to California or elsewhere,” Speakes-Backman said yesterday by telephone from Baltimore. “I don’t see it as being realistic, especially as far along as we are. We have a good working relationship.”

While carbon markets are gaining increasing attention in anticipation of a federal rule curbing power-plant emissions, California has yet to find another U.S. state to join the economywide trading system it established last year and expanded to include the Canadian province of Quebec on Jan. 1. Quebec Premier Philippe Couillard said in an interview Sept. 23 that it was in talks with New England governors about joining and that Vermont expressed particular interest in integrating markets.

Recruiting Partners

Couillard described a California-Quebec market in an interview at Bloomberg News’s headquarters in New York as “not ideal” and said his government was “working very hard to recruit new partners” in Ontario and the Northeast while California’s regulators work with Oregon and Washington state.

California Air Resources Board Chairman Mary Nichols traveled to Denver for a private meeting in July with regulators from 12 other Western states to discuss how they could work together on the emissions cuts proposed by the Obama administration.

Obama’s plan, released in June, would reduce carbon-dioxide pollutants from power plants 30 percent from 2005 levels by 2030 and offers incentives to states who develop regional systems, including an extra year, until 2018, to comply. The Environmental Protection Agency is expected to issue a final rule on the emissions cuts in June.

“The states have a variety of different approaches and levels of enthusiasm for this,” Stanley Young, spokesman for the California air board, said by telephone yesterday from Sacramento. “We stand ready to work with them to help achieve those targets.”

System Appeal

RGGI’s system will probably appeal to those states seeking only to meet the EPA’s power-plant rules, said Jon Costantino, a Sacramento-based senior advisor for the law firm Manatt, Phelps & Phillips LLP. He said the California-Quebec market will attract those who want to take “the full plunge” into a system that regulates everything including power plants, oil refineries and cement factories.

California is “the whole enchilada whereas RGGI is not,” said Costantino, who was previously climate change planning manager at the state’s air board. “Even deciding to just sort of half-link with a state would be a major policy call that California has to think about.”

Vermont has held “preliminary discussions” with Quebec about how to align carbon-pricing programs, Justin Johnson, deputy secretary of the state Agency of Natural Resources, said by e-mail yesterday.

“We believe that carbon markets will be stronger if we bring in more players,” he said. “We have no interest in leaving RGGI, we are more interested in further developing in carbon market in our region and others.”

Real Questions

Fully merging the carbon markets run by California, Quebec and RGGI poses “real questions” given the different scopes of their programs, Speakes-Backman said. California and Quebec regulators have expressed similar concerns.

Nichols said at a conference last year that RGGI is a “different enough” program to make a link complicated. Couillard described the price of carbon credits traded as part of RGGI’s system as “very low.”

RGGI allowances, each permitting the release of a metric ton of carbon dioxide, sold for $4.88 each at the group’s most recent auction. California permits sold for $11.50 each at its latest sale in August.

Copyright 2014 Boomberg

Lead image: Emissions via Shutterstock

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