California eyes cap-and-trade plan to trim greenhouse gases

Bakersfield Californian ^ | 4/6/05 | Don Thompson - AP

[NormsRevenge]

SACRAMENTO (AP) - Even as four western states agreed this week to help string electric transmission lines to power-starved Southern California from the coal fields of Wyoming, California energy regulators began Wednesday considering new ways to force the state's utilities to switch to cleaner energy.

The California Energy Commission's Climate Change Advisory Committee is eying "cap-and-trade" proposals, similar to what has worked to limit everything from smog to acid rain. This time it would go to limit so-called "greenhouse gases" that contribute to global warming.

Advocates say such a move by California would again lead the way for other states. Already California has agreements with Oregon and Washington to trim emissions that contribute to climate change.

Yet Monday's announcement by the governors of California, Wyoming, Nevada and Utah of a plan to encourage construction of a "Frontier Line" from the Rocky Mountains to California illustrates a big problem: neither power generation nor greenhouse gases stop at state lines.

Cap-and-trades work by setting emissions limits, but let polluters buy and sell credits to help meet the standard. Where they've worked for other emissions, however, have been over the entire nation or broad regions such as Europe or the East Coast, said Stacey Davis, a consultant to the energy panel from the Washington, D.C.-based Center for Clean Air Policy.

One option for a California-led effort to limit greenhouse gases would require an agreement among several states to prevent utilities from simply getting their power from areas that don't have the same restrictions and, moreover, could likely produce the unregulated power at a lower cost.

California already gets 20 percent of its power from out of state, and half the carbon dioxide emissions from California power use actually are generated by coal-fired plants in other states. Coal-fired power is where the growth is, and coal-rich states including Arizona and New Mexico are particularly unlikely to go along, Davis said.

Half the power generated within California is produced using natural gas, the rest from nuclear, hydroelectric and renewable methods that do not emit greenhouse gases. Energy is produced with roughly half the carbon dioxide emissions at twice the cost as across the rest of the West, which sets up inequities that could be abused if California acted alone to reduce emissions.

"For California to do something on its own, we can't necessarily rely on other states," Davis told the advisory panel.

So she favors another option: putting the regulatory burden on utilities, other suppliers and generators that distribute power in California instead of those who generate it in several states. Each would have to meet the emissions standard, a process that could include trading carbon credits while encouraging long-term use of cleaner energy.

Basing such a cap on power demand, instead of generation, has never been tried anywhere, Davis said.

Creating such a cap "would essentially create two separate power markets within the western grid - the capped California demand market, and the uncapped remainder of the grid," Davis said in her draft report. Cleaner energy in California and neighboring states would gain a cost advantage, though the effect on electricity prices to consumers is unclear while computer models are being developed.

Western generators could simply send their cleaner power to California and dirtier electricity to states without a cap with no overall drop in emissions. Other potential difficulties include monitoring compliance and conflicting with the federal government's regulation of interstate transmissions. And limiting California's power sources could increase supply problems, particularly in the short run.

A consensus among the advisory committee members favoring that alternative seems to be developing, said Energy Commissioner James Boyd, who chairs the panel.

Pacific Gas and Electric thinks it's "a good concept because having a market-based solution can address climate change issues in a positive manner," said spokesman Jon Tremayne.

But Southern California Edison reissued a statement noting that "neither greenhouse emissions nor electricity stop at state borders," illustrating what it said is the need for a national policy, such as is pending in Congress, in lieu of state-by-state efforts.

California's discussion comes after the Kyoto Protocol took effect in February, requiring dozens of countries to cap or reduce carbon dioxide emissions from power plants and heavy fuel-using industries.

The United States' decision not to join the pact is spurring interest by individual or coalitions of states, including the nine-state Regional Greenhouse Gas Initiative on the East Coast. They include Delaware, Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

In a separate effort to rein in greenhouse gases, California air pollution regulators in September ordered the auto industry to trim exhaust levels on cars and light trucks in the state by 25 percent before 2016. That effort is being challenged by the industry, which also argues such decisions must be made on a national level.

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On the Net:

California Energy Commission: http://www.energy.ca.gov

[pacpam]

Caps always lead to higher costs. And why would any clear thinking state even consider putting a cap on demand if they want growth - which CA supposedly wants? I liked the scientist who proposed the world adapt to the coming change - climate - instead of trying to keep the change from happening.