Seven northeastern US states sign accord to cut CO2 emissions

New York (Platts)--20Dec2005

Representatives from seven northeastern US states released a memorandum
of understanding Tuesday, outlining the Regional Greenhouse Gas Initiative,
which would call for a 10% reduction in carbon dioxide emissions by 2020. 

     The MOU was signed by the governors of the seven states--New York, New
Jersey, Delaware, Connecticut, New Hampshire, Vermont and Maine--and will
serve as the basis for a model rule that will be developed in 2006, for review
by stakeholders in the states. 

     RGGI would set up a cap-and-trade system for carbon dioxide from power
plants, aiming to stabilize emissions at 150-mil tons between 2009 and 2015,
and then cut emissions 10% by 2020. Conceived by New York Gov George Pataki in
2003, RGGI originally attracted nine states, but Massachusetts Gov Mitt Romney
last week said his state would not not participate in the process and instead
would develop its own plan. Romney pulled his state from the RGGI initiative
after other states rejected his call for price caps on CO2 emission
allowances. Rhode Island also withdrew on the issue of price caps. 

    Under the MOU, states will be able to allocate emissions as they see fit,
though 25% must be auctioned and the proceeds allocated for consumer benefit
or "strategic energy purposes," such as efficiency or renewables. 

     In addition, offsets from other sources may be used for up to 3%
compliance, with 50% reductions in the value of offsets if they come from
outside the RGGI region. If allowance prices exceed $7/ton, generators would
be able to use offsets from anywhere in North America, with 100% value and up
to 5% of compliance. If the price exceeds $10/ton, generators could use
international offsets for up to 20% of compliance. The MOU allows for the
addition or withdrawal of states.

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