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October 3, 2006

STATE ACTIONS ON GLOBAL WARMING SPAN THE U.S.

As Congress and the Administration continue to debate and study the global warming problem, grassroots concern about this looming challenge has led several states and regions to take action on their own. Many states have adopted climate change action plans, and a smaller number are taking mandatory steps to reduce carbon emissions. Four efforts are particularly worthy of mention:

RGGI—the Northeast Regional Greenhouse Gas Initiative
California's carbon cap legislation—Global Warming Solutions Act
Oregon's carbon cap planned legislation
California's "Pavley" Act

In August, culminating five years of discussion and development, the Regional Greenhouse Gas Initiative staff issued the final Model Rule, which the participating seven states will now use as the basis of their implementing regulations for the first compliance period beginning in 2009. Energy efficiency has figured prominently in the RGGI program's development, including a provision in the Model Rule that at least 25% of carbon allowances will be allocated for public purposes. It is anticipated that a large proportion of the funds flowing from the auction of these allowances will be used for energy efficiency. In addition, the state of Maryland will join RGGI pending the outcome of an economic impact study this fall, and the state of Massachusetts may rejoin RGGI after retiring Governor Romney leaves office in January. Read the press release and download ACEEE's report, Energy Efficiency's Role in a Carbon Cap-and-Trade System: Modeling Results from the Regional Greenhouse Gas Initiative.

On August 30, the California legislature passed AB 32, the California Global Warming Solutions Act of 2006, which places an aggressive carbon cap on the state's major emitting sectors. It is generally viewed as the most aggressive carbon cap in the nation to date. It is also innovative for the power sector because it places the carbon cap on load-serving entities, which are typically the distribution electric utilities. The tradition in air quality cap-and-trade programs is to place the cap on generators; but this makes end-use energy efficiency problematic as an emission reduction measure, because with the cap on generation, saving energy at the end use cannot be directly credited with reducing emissions. By placing the cap on distribution companies, utilities are enabled and encouraged to use energy efficiency directly to achieve carbon reduction goals.

The state of Oregon is also developing a mandatory carbon cap for the power sector, and like California, the state is targeting distribution utilities rather than generators. Decisions are expected in the next several months.

Led by California's 2002 law (known as the Pavley Act after legislative sponsor Fran Pavley), 10 states including CT, MA, ME, NJ, NY, OR, PA, RI, VT, and WA. have adopted similar if not identical requirements that would regulate greenhouse gas emissions from vehicles. Pavley would reduce average greenhouse gas emissions by 30%. The California law is being litigated by the auto industry, and that case could go to the Supreme Court, so it may be some time before this issue is resolved.

These initiatives are already creating added pressure on Congress to act on national carbon emission reduction legislation. The affected industries are increasingly convinced that national action is inevitable, and many would rather have certainty on this issue so that they can plan their business strategies accordingly. Just as it has with appliance efficiency standards and other energy policy issues, state leadership is again pushing the federal government towards substantive policy action.

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