States Mull ‘Plan B’ Carbon Market as U.S. Climate Bill Falters (Money, Money, Money...)

From Bloomberg:

Cash-strapped states in search of new revenue may establish their own “cap-and-trade” program for greenhouse gases covering more than half the U.S. economy if Congress doesn’t set up a federal emissions market.

“Plan A is we get a federal cap-and-trade program,” Judi Greenwald, a vice president at the Arlington, Virginia-based Pew Center on Global Climate Change, said by phone. State-enforced greenhouse gas limits “can be a credible Plan B.”

Ten Northeastern states already have a cap-and-trade program for power plants and raised $432.8 million from carbon dioxide permit sales since September 2008. Two other multistate coalitions plan to start cap-and-trade programs in 2012 that would cover power plants and other pollution sources such as factories, cars and trucks....

...New York Diversion

New York, the largest member of the Regional Greenhouse Gas Initiative, is considering the diversion of $90 million raised through permit auctions as part of a $5 billion deficit- reduction plan. The auction revenue was originally earmarked for energy efficiency, renewable energy and consumer aid.

Other states working to close their budget deficits could turn to cap-and-trade revenue as “one small piece of the solution,” Nicholas Johnson, the state fiscal project director at the Washington-based Center on Budget and Policy Priorities, said by phone.

Instead of coupling “one big revenue piece” with the spending cuts needed to balance their budgets, states are raising taxes and fees “a bit here and a bit there,” Johnson said. “That’s where something like revenue from a cap-and-trade system comes in.”

While each state in the Northeast cap-and-trade program decides how many permits to sell and how many to issue for free, as a group they are auctioning 87 percent of their carbon dioxide allowances. In the Western Climate Initiative, state officials drawing up the rules of the cap-and-trade program want at least 10 percent of the carbon permits to be auctioned.

California Auction

California, the largest member of the Western Climate Initiative, will definitely auction some of its carbon dioxide permits, Michael Gibbs, an assistant secretary at the state’s Environmental Protection Agency, said in an interview. California’s first auction is planned for late 2011, Gibbs said....MORE

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