New York Governor Could Rewrite Carbon Trading Rules

The report has alarmed environmental and energy groups, who are urging the governor not to re-open the regulations.

Last August, New York approved the statewide regulations that enable its participation in the 10-state Regional Greenhouse Gas Initiative, RGGI, established to control emissions of carbon dioxide, CO2, from power plants.

For the first time anywhere in the world, the RGGI put allowances up for sale at auction, rather than distributing them for free to power plants.

Two quarterly RGGI auctions of emissions permits, or allowances, have been held - in September and December 2008. A third auction is slated for later this month.

The environmental and energy groups maintain that the RGGI rules were finalized last August after a transparent, public three-year process that received input from consumer, environmental and energy groups, as well as power producers and other interested parties.

"It is disturbing that the governor made this commitment to generators, which disregards the outcome of the RGGI rulemaking process," said James Van Nostrand, executive director of the Pace Energy and Climate Center. "The real losers will be the citizens of New York, who will potentially be denied the conservation and renewable energy benefits that would be funded from the sale of carbon allowances that the governor would apparently prefer to give away to polluters."

The Albany-based trade association Independent Power Producers of New York today renewed its call for a "properly structured Regional Greenhouse Gas Initiative that balances environmental, economic, and energy needs." Members generate over 75 percent of New York's electricity using hydro, nuclear, wind, coal, oil, natural gas and biomass.

Niagara Mohawk's coal-fired Dunkirk steam station is located on a peninsula of Lake Erie. (Photo by David Parsons courtesy NREL)

The association wants a price cap on the cost of the emission allowances and argues power producers who are locked into long-term contracts will be unable to recoup costs associated with the purchase of CO2 allowances.

IPPNY says its call for an appropriate set-aside of allowances for power producers locked into long-term contracts is consistent with programs that have been implemented in neighboring states.

Gavin Donohue, IPPNY President and chief executive, has said, "Since there currently is no carbon-control technology available to retrofit power plants, power producers should have priority access (like in other programs) to the emission allowances needed for facilities to operate in a reliable manner. In addition, a price cap on the cost of the emission allowances would soften the blow to ratepayers."

But environmental groups view the governor's promise to reconsider the RGGI rules as a step backward.

Luis Martinez, energy attorney with the Natural Resources Defense Council said, "At a moment when President [Barack] Obama has committed to setting America on the path to a clean energy economy, Governor Paterson is on the cusp of undercutting New York's clean energy progress."

"Reopening the rule for the Regional Greenhouse Gas Initiative to give power plant owners another bite at the apple is not only unnecessary to address their concerns, it takes us in the wrong direction. Governor Paterson should be fulfilling the needs of consumers, not making deals with industry behind closed doors."

The IPPNY counters that the reconsideration was not a closed-door deal, saying, "For several years, these concerns were communicated in IPPNY's comments to the Department of Environmental Conservation and to the press and public through multiple press releases during the RGGI rulemaking process. Both during the rulemaking process and after, IPPNY made those same concerns known to the Executive Branch in a manner that is available to every citizen and interest group in this state."

The environmental and energy groups are calling on the Paterson administration to release the details of the alleged agreement and today submitted Freedom of Information requests for the governor's schedule, as well as any communications with staff and power producers. Last week several groups requested a meeting with Paterson administration staff to get the details on the governor's agreement with IPPNY.

The 10 states participating in RGGI are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

Under the RGGI process, the 10 states will stabilize power sector CO2 emissions at the capped level through 2014.

The cap will then be reduced by 2.5 percent in each of the four years 2015 through 2018, for a total reduction of 10 percent.

RGGI creates a pollution trading market that sets new limits on the amount of greenhouse gases power plants can emit.

Plants must hold permits for every ton of pollution. Those that find low cost ways to reduce emissions will need to purchase fewer allowances and can sell any unused allowances to less-efficient plants that need them.

Proceeds from the December 2008 auction of allowances were $106.5 million, which was shared among all 10 RGGI states. The states will invest those funds in energy efficiency and clean energy technologies. New York's share of the auction proceeds is approximately $42 million.

On December 19, 2008, Governor Paterson heralded New York's participation in the sale of carbon dioxide (CO2) pollution allowances as a success.

"The RGGI auction allows New York State to continue its commitment to break free from traditional fossil fuels with dedicated funding for clean and renewable energy initiatives," the governor said then. "As we face the worst fiscal crisis in generations, it is critical that our State continue to take the necessary steps to help reduce the cost of energy and reduce pollution."

"With our participation in RGGI, New York State continues to demonstrate national leadership by supporting clean and renewable energy technologies as we provide an example for other states and the nation to follow," said Governor Paterson.

Pete Grannis, New York State Commissioner of Environmental Conservation and RGGI chair, said then, "The RGGI program is being viewed as a model for greenhouse gas reduction programs nationally and internationally. With two successful auctions now completed, New York and its partner states are laying the groundwork for national action to curb global warming."

The nonprofit groups blame the power companies for trying to undermine limits on the emission of greenhouse gases.

"Power producers have been looking for ways to derail the nation's very first effort to reduce global warming pollution, the Regional Greenhouse Gas Initiative, since it was on the drawing board. And these polluters appear to have found a sympathetic ear," said Jackson Morris, Environmental Advocates of New York. "Now the ball is in Governor Paterson's court. We're calling on him to stick with the program and put New Yorkers' concerns before polluters."

"Numerous scientific studies completed too late to be included in last year's Fourth Assessment of the Intergovernmental Panel on Climate Change reveal that many effects of global warming are occurring more quickly and with potentially more serious consequences than previously predicted," said Lance Pierce, director of the Climate Program at the Union of Concerned Scientists. "Now is a time for leadership on policies that will reduce emissions, not backsliding."

Copyright Environment News Service (ENS) 2009. All rights reserved.