NEWS

7-state cap-and-trade plan targets greenhouse gases

07/28/2008

By Tony Davis

ARIZONA DAILY STAR

Arizona utilities, gasoline distributors and other industries would start cutting carbon dioxide emissions in four to seven years under a proposed program aimed at curbing climate change.

The industries in this state, six others and four Canadian provinces face a 15 percent cut by 2020, compared with what they put into the air three years ago.

The goal comes in the just-released first draft of a seven-state plan to reduce greenhouse-gas emissions linked to global warming. The Western Climate Initiative proposes a cap-and-trade program, letting companies buy or trade the right to emit greenhouse gases on the open market.

Some emission rights also could be sold by the state as allowances at public auction. That could raise money to help electricity users defray higher utility bills resulting from an emissions limit.

A cap-and-trade program has been seen by environmentalists and many public officials as an effective way to limit greenhouse gases. Without it, Arizona would become increasingly vulnerable to global warming, which many scientists have warned will mean droughts, water shortages and worsening air pollution and public health problems, program advocates say.

The states hope this program will become a national model.

But some key details are unknown, and the plan is likely to cause controversy, possibly leading to litigation.

Arizona utilities say they’d prefer a national program to regional ones. Lawsuits could occur if the Legislature and the Arizona Corporation Commission aren’t involved in creating the program. Environmentalists warn that emission limits will come too late - possibly too late to let the state make the 2020 deadline - because they won’t kick in until 2012 at the earliest.

The program is aimed at getting some sort of limits on the books, given the federal government’s lack of action so far in curbing emissions, said Lori Faeth, a senior policy adviser to Gov. Janet Napolitano.

"It is a really critical issue having impacts on Western states," Faeth said. "Obviously, a state-by-state program will help address a significant portion of emissions."

The seven-state coalition will release a final draft in September.

Among the key questions:

● How Arizona and the other states will adopt their plans - by governors acting on their own, or by the state legislatures voting to adopt them. Last week Faeth declined to say which way Arizona’s governor will go.

● How many industries and specific plants would be covered.

● The program’s effect on utility bills and gasoline prices. An economic analysis is due with the final draft.

● How much of a cut each industrial plant would face. That will depend on each facility’s specific circumstances and many other factors, Faeth said.

● Whether utilities and other industries wanting to emit more than they’re allowed could trade for additional allowances or whether they would have to buy them at auction.

As the program is planned, most industries emitting more than 10,000 metric tons annually - 11,025 tons in American measurements - would start monitoring emissions by 2011. Starting in 2012, plants emitting more than 25,000 metric tons annually - 27,562 tons in American measurements -would have three years to limit emissions. By 2015, the industries would face another three-year deadline to cut emissions.

Transportation - Arizona’s largest source of carbon dioxide - wouldn’t face cuts until 2015. Those cuts would be enforced on gasoline distributors only.

It will not be until the final draft is released in September that Napolitano will start exploring how to make this program happen, Faeth said. She would not commit to seeking legislative approval. Napolitano did avoid legislative action on one plan, by imposing new carbon dioxide emission standards for cars and trucks by rule.

Bill Mundell, a longtime member of the Arizona Corporation Commission, said Napolitano cannot impose emission limits on power plants on her own.

"Under the state constitution, the commission is considered a fourth branch of government," Mundell said. "Any proposal she makes needs the approval of the commission.

"We have to decide how to pay for it," he added. He said estimates already presented to the commission suggest that a cap-and-trade system could raise a household’s electricity bill by $50 to $80 a month for homeowners who get a significant share of their power from coal-fired plants - major emitters of carbon dioxide - that provide much of Arizona’s power.

Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, said lawmakers and the commission should be involved.

"If this is just something that happens through executive action - and if it happens through executive action without meaningful stakeholder involvement - I’m sure that it would be challenged in all appropriate ways," said Hamer, stopping short of saying that his organization would file suit.

Environmentalists welcomed the plan as a first step toward tackling the global-warming issue, but they were disappointed that it doesn’t kick in sooner and that it doesn’t restrict emissions from individual vehicles. Arizona environmental groups plan to unite with close to 100 other groups around the West to form a coalition to push for a tougher plan.

"The goals are admirable, . . . but the plan is being structured in a way to make it difficult to achieve the goals by 2020," said Rob Smith, the Southwest representative of the Sierra Club. "It’s four to seven years before limits are even set, which allows more growth to occur."

They also want transportation brought into the program sooner, on the grounds that an emissions cut would ultimately force either governments or the marketplace to come up with other kinds of fuels or provide more alternative forms of transportation.

"The more that we can cap transportation fuels, the more options consumers will have, and they cannot only save money but also enjoy better air quality and public health benefits," said Diane Brown, executive director of the Arizona Public Interest Research Group.

In reply, Faeth noted that the state already is trying to reduce emissions through a "clean car" program, adopting standards promoting biofuels and state government actions such as moving toward a fleet of less-polluting vehicles. "It takes time to implement a program of this scope, and 2012 is a very realistic date," Faeth said.

Tucson Electric Power Co. favors a national approach, given that both major presidential candidates have supported such a plan, utility spokesman Joe Salkowski said.

A regional plan would present a number of problems, such as deciding how to account for power that is produced in another region but shipped into this one, or the other way around, Salkowski said. Although most of TEP’s power comes from Arizona and New Mexico, the concern is for the entire regional emissions system’s viability, he said.

A far more diverse marketplace of buyers and sellers would exist to support a national emissions trading system, he said.

"I think we all understand some system regulating CO2 emissions is coming," he said. "It is critical that it be done properly. It would be rash to create a regional system that might be crippled by its scope."

The Phoenix-based Salt River Project also favors a national program, but it hopes a regional program eventually can be absorbed into a national one.

For Arizona, the concern is that because this state relies more on fossil fuels to produce electricity than West Coast states do, we could be in a position of having to pay more money to get additional emission rights - causing a transfer of wealth from this state to others, said Richard Hayslip, the utility’s associate general manager.

But he added, "We’re going to try our best to make sure it’s a workable program," speaking of the regional plan. "If it comes out as a program that appears to us to be unworkable, we’d take stock to see what we would do. But for now we are optimistic, and we are working within the program."

DID YOU KNOW

The average temperature in Arizona for the five-year period from 2003 through 2007 was 2.2 degrees higher than the historical average for the 20th century, according to a report this year by the Rocky Mountain Climate Organization and the Natural Resources Defense Council.

That rise was more than twice the global average increase of 1 degree for the same period.

Average annual temperatures in the Southwest, including Arizona, are projected to increase 4.5 to 7 degrees or more during this century, according to a comprehensive report last year by the Intergovernmental Panel on Climate Change.

Source: Star archives

HAVE YOUR SAY

To comment on the new Western Climate Initiative cap-and-trade program, go to the initiative’s Web site, www. westernclimateinitiative.org, and click on "Submit comments," on the left column.

The other states in the Western Climate Initiative are California, Montana, New Mexico, Oregon, Utah and Washington. Four Canadian province governments - of British Columbia, Manitoba, Ontario and Quebec - also are involved.

● Reporter Howard Fischer of Capitol Media Services contributed to this report. ● Contact reporter Tony Davis at 806-7746 or at tdavis@azstarnet.com.