Nearly all US states are considering allowing their utilities to deploy carbon trading to help meet nationally-set emission curbs, power sector experts said on Wednesday.
State officials are examining so-called minimum compatibility trading as one way to comply with the federal government’s Clean Power Plan to cut CO2 emissions from existing power plants, the experts told delegates at the Navigating the American Carbon World conference in Los Angeles.
The work is ongoing despite legal challenges in more than a dozen states and calls by Senate Majority Leader Mitch McConnell to ignore the EPA plan, which sets emission goals for each state but offers flexibility in how to reach them.
“As many as 41 of 50 US states are looking at what multi-state solutions might work for them and a few of those remaining nine might be thinking about this in the near future,” said Doug Scott of the Great Plains Institute, a think tank working closely with 15 mid-western states on the Clean Power Plan.
“While no state is signing off on this yet, this is one of the ideas that we’ve have been exploring with them,” he said.
LOOSE FRAMEWORK
The approach could enable states to lower their costs of compliance while side-stepping political wrangling associated with fully blown cap-and-trade programmes, according to Duke University’s Nicholas Institute.
Without specifically endorsing trading, states would merely require common standards for crediting emission reductions and common tracking systems to enable utilities to trade, even between jurisdictions adopting absolute emission caps or those choosing “rate-based” CO2- intensity standards.
Many states are currently hesitant about building regional cap-and-trade systems or joining the existing WCI or RGGI market, said Derek Furstenwerth of utility Calpine, which operates 88 power plants across North America.
But he said the looser approach might be easier, given the one-year deadline states have to work out how they will comply once the plan is finalised this summer.
“That is a very short period of time to complete a very, very complex process.”
The EPA has indicated that it plans to give extra time to states that work together to submit proposals, but it’s unclear whether this looser approach would qualify, Great Plains’ Scott said.
“If it is something that could qualify to get extra time, that could be very important.”
STARTING POINTS
California is working particularly closely with 13 other states that already collaborate within the Western Electricity Coordinating Council, according to Michael Gibbs of the California Air Resources Board, the state’s environment agency.
“We are particularly interested in examining how we can use our cap-and-trade programme and we want to see if there are ways we can work with other states to see how we can do that collaboratively.
“Cap-and-trade is a very specific type of linking and we are open to other types of linking also,” he said, adding that it could be possible to link with states that have quite different energy mixes and emission reduction trajectories.
“We have to recognise we are starting from different places, so effort could be equally stringent without similar percentage values, its more flexible than that.”
By Ben Garside – ben@carbon-pulse.com
