AUGUSTA - May 02 - Bangor Daily News

State officials are busy finalizing the rules that will allow Maine to participate in a first-in-the-nation approach to combating global warming.

Later this year, a coalition of northeastern states, including Maine, will formally launch a regional cap-and-trade program that aims to reduce emissions of the carbon dioxide from power plants through competition rather than direct regulation.

Known as the Regional Greenhouse Gas Initiative, or RGGI, the 10- state agreement essentially creates a "carbon market" where the rights to emit carbon dioxide can be bought and sold. The framework of the multistate compact requires all states to cap CO2 emissions from power plants beginning next year and then gradually reduce them by 10 percent by 2019.

Supporters argue such market-based programs offer emitters financial incentives to surpass their pollution-reduction goals. Fossil fuel-burning power plants that are more efficient than required can either bank their excess emissions allowances, also known as "credits," for future use or sell them to plants exceeding their limits.

While power plants will have to purchase such credits for each ton of CO2 they emit, the credits will be sold on the open carbon market as a commodity. That means the CO2 allowances - which will be sold in 1,000-ton blocks - can be purchased by investors or even environmental organizations that want to remove the pollution credits from the market.

Jim Brooks, who heads the Maine Department of Environmental Protection's Bureau of Air Quality, said cap-and-trade systems involving Maine and other states have proven successful in reducing pollution that causes acid rain and smog.

"Usually, it's the cheapest way to achieve that level of reduction" compared to traditional regulation, Brooks said. "But you have to let go and allow the market to do its work."

The market is expected to formally open on Sept. 10, when Maine and about half of the 10 participating states begin auctioning carbon allowances. Brooks and other DEP officials have spent the past several months working with representatives of the other states to synchronize the programs.

"It's really been a huge amount of work trying to get 10 states to work together," said DEP Commissioner David Littell. More states are expected to participate in the second auction, scheduled for sometime in December.

European nations have had a cap-and-trade CO2 system in place for several years. But no one knows exactly what to expect when RGGI opens.

The minimum auction price for a CO2 allowance - equivalent to 1 ton of the gas - will be $1.86. But officials say the per-allowance price could hit $5. And some have predicted the price could go much higher, thereby driving up costs at power plants, many of which will pass along the costs to consumers.

Maine has six power plants - two of which are actually paper mills that produce electricity - that will be regulated by RGGI.

Anticipating such volatility, Maine lawmakers built in a ratepayer rebate provision into the enabling legislation once the price of allowances rises above $5. State officials have predicted that the average household total energy bill for the year could rise by between $3 and $22 because of RGGI.

But Brooks and other state officials believe consumers' electricity bills could actually decrease because the sale of CO2 allowances is expected to generate between $10 million and $25 million for energy-efficiency programs in the state.

Supporters argue that Maine also stands to benefit from related carbon "offsets" available from other industries that are reducing emissions of greenhouse gases. Examples of offsets include landfill gas recovery, reforestation and methane recovery on farms.

The other states that have signed onto RGGI are Massachusetts, New Hampshire, Connecticut, Vermont, Rhode Island, New York, New Jersey, Maryland and Delaware.

kmiller@bangordailynews.net

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