In order to more efficiently reduce greenhouse gas emissions, California Gov. Arnold Schwarzenegger and New York Gov. George E. Pataki have agreed to explore ways to link California’s future greenhouse gas emission credit market and the Northeastern and Mid-Atlantic states’ Regional Greenhouse Gas Initiative (RGGI) upcoming market.
RGGI is a cooperative effort by Northeast and Mid-Atlantic states to design a regional cap-and-trade program designed to achieve a 10% reduction in greenhouse gas emissions form power plants by 2019.
The RGGI program will implement the nation’s first mandatory cap-and-trade program for carbon dioxide emissions. In addition to New York, other states signing the agreement to implement RGGI include: Connecticut, Delaware, Maine, New Hampshire, New Jersey, and Vermont. The State of Maryland also has adopted legislation to join RGGI by June 2007.
Earlier this year, a model set of regulations to implement RGGI were finalized. New York and the other six states who are participating in RGGI are able to use this model to draft the necessary regulations or legislation to implement this program in their own state. New York plans to propose its draft regulation in the next few months.
RGGI uses a flexible, market-based cap-and-trade system. Each state will issue one emissions credit or allowance for each ton of CO2 emissions allowed under the regional cap. These emissions credits will be traded as commodities.
Last month, Governor Schwarzenegger signed AB 32, California’s landmark greenhouse gas emissions legislation that established a program of regulatory and market mechanisms to achieve real, quantifiable, cost-effective reductions of greenhouse gases. (Earlier post.)
AB 32 requires the California Air Resources Board (CARB) to develop regulations and market mechanisms that will ultimately reduce California’s greenhouse gas emissions by 25% by 2020. Mandatory caps will begin in 2012 for significant sources and ratchet down to meet the 2020 goals.
The two governors discussed ways to link the two efforts to create a uniform carbon trading system.
Gov. Schwarzenegger also announced an executive order directing California Secretary for Environmental Protection Linda Adams to coordinate state climate change policy. The executive order, which will formally be signed on Tuesday, also instructs the secretary to work with the California Air Resources Board to seek to develop a framework that allows California to work together with RGGI. Such an arrangement would help build a large, robust carbon trading market.