North America Carbon Markets
U.S. Regional Carbon Markets
In lieu of a Federal Cap and Trade Program for carbon emissions, many states have taken it upon themselves to introduce programs and legislation to regulate greenhouse gas emissions.
The Regional Greenhouse Gas Initiative (RGGI), conceived in 2003, covers fossil fueled generators 25 megawatts (MW) or larger in 10 Northeast and Mid-Atlantic States (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont). By 2014, RGGI will reduce greenhouse gas emissions to 1990 levels, and will continue to ratchet emissions down an additional 10 percent by 2018.
Unlike the Federal NOx and SO2 programs, RGGI plans on auctioning the vast majority of the allowances rather than allocating them to affected sources. Auctions will be held on a quarterly basis and the first one is slated for September 25, 2008.
The Western Climate Initiative (WCI) was announced in 2007 is currently comprised of seven Western States (Arizona, California, Montana, New Mexico, Oregon, Utah and Washington) and four Canadian provinces (British Columbia, Manitoba, Ontario and Quebec). The goal of WCI is to reduce greenhouse gas emissions to 15 percent below 2005 levels by 2020.
In 2006 California announced the California Global Warming Solutions Act of 2006 (AB32). AB32 is designed to regulate Greenhouse gas levels back to 1990 levels by 2020 and to 80 percent below 1990 levels by 2050. The statute applies not just to carbon dioxide, but methane, nitrous oxide, hydrofluorocarbons and sulfur hexafluoride. The California State Air Resource Board (CARB) is charged with regulating AB32 and is hoping to have a scoping plan adopted by January 2009 to determine the methodology to be used to attain the goals.
In November 2007, the Midwestern Greenhouse Gas Reduction Accord (MWGGA) was established. Seven states and one Canadian province are participating in MWGGA (Iowa, Illinois, Kansas, Michigan, Minnesota, Wisconsin and Manitoba). The accord will focus on regulating the six pollutants identified in the Kyoto Protocol. The MWGGA is currently in the early stages of developing rules and guidelines.
With the continuing absence of a Federal Program, it is likely that more states and regions will begin to develop and implement their own rules and regulations to curb the growth of Greenhouse Gas emissions and these markets will continue to expand.