Isra-Mart srl:Multi-pronged tack expected for US carbon cuts

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Cap-and-trade to continue as part of portfolio of emission reduction tools for states and regions; scheme co-operation expected

The US is likely to move forward with a piecemeal approach to reducing greenhouse gas (GHG) emissions, according to speakers at the US-China Carbon Finance Cooperation and Development Conference in New York yesterday.

“Cap-and-trade is alive in the US and will continue to move forward,” said Jonathan Schrag, executive director of the Regional Greenhouse Gas Initiative (RGGI), the first mandatory, market-based scheme to reduce GHG emissions in the US.

Speaking on a panel about the US carbon market at the conference yesterday, he said states would continue to use cap-and-trade as part of a portfolio of mechanisms to reduce carbon emissions. Others could include energy efficiency and the use of renewable energy standards (RESs), according to panelists.

Schrag also said he was “cautiously optimistic” about states’ ability to work together to roll out emissions trading schemes nationally over the next two years, rather than relying on a federal cap-and-trade programme. “There is no federal department of motor vehicles, but we are all able to drive in other states,” he argued.

RGGI and the Western Climate Initiative (WCI) – a collaboration of US and Canadian jurisdictions that published details of a forthcoming cap-and-trade initiative in July 2010 for implementation in January 2012 – have already been comparing notes on industry best practices, according to Schrag.

A May 2010 white paper addressing the use of offsets in North American trading schemes was also released by the two entities along with the Midwestern Greenhouse Gas Reduction Accord, a seven-member US/Canadian grouping currently exploring options for a Midwest cap-and-trade programme.

State or regional schemes have recently come to be regarded as the only viable route forward for US carbon trading in the short to medium term. The US House of Representatives passed climate change legislation that contained a carbon cap-and-trade scheme design in June 2009, but federal legislation stalled when the Senate failed to pass a similar bill during the last Congress.

The introduction of the regulation of GHGs by the US Environmental Protection Agency (EPA) in January 2011 could also contribute to state and region emission reduction aims. The agency launched its Greenhouse Gas Reporting Programme in October 2009, which requires large emission sources and fuel suppliers in industrial sectors to report GHG emissions data. The data will be used to guide the development of future initiatives to reduce GHG emissions.

However, the EPA’s move to regulate GHGs has attracted significant opposition from both industry and political players, who believe carbon emission reductions should be dictated by legislation, rather than EPA regulation.

According to David Hunter, US director of the International Emissions Trading Association (IETA), the House could pass a bill to repeal the EPA’s powers in this area during the next Congress. But he argued the Senate would probably vote for a more bipartisan bill that restricts EPA powers, but includes certain elements of recent climate bills that failed to make it through Congress, such as a RES.

“A bill to wipe out the EPA’s powers won’t be passed by Congress,” Hunter added. “A bill with restrictions [on the EPA], as well as other clean energy mechanisms is possible.”

Peter Goldmark, program director, climate and air, at the Environmental Defense Fund, and chair of the panel, noted that opposition to a ’serious’ climate bill has moved from the industrial sector to parts of the Republican party, such as many of the Tea Party activists elected in the November mid-terms.

Another panelist, Chelsea Henderson Maxwell, former senior advisor on energy and climate change to Republican Senator John Warner, agreed. She added: “We need more utilities and industrials talking about economic benefits such as clean energy jobs and manufacturing to move [climate legislation] forward.”