A new regional effort by seven Northeastern states to limit greenhouse gas emissions is, like beauty, in the eye of the beholder.
Either the plan outlined this week by New York and six New England states will push America toward developing a nationwide plan, or it will waste money and yield few environmental benefits, say those on either side of the emissions debate.
"We will use a market-based system to curtail harmful CO2 [carbon dioxide] emissions, ... reduce our dependence on foreign energy, strengthen our economy, and take meaningful steps in the fight against climate change," New York Gov. George Pataki, who spearheaded the initiative, proclaimed Tuesday.
Others are openly doubtful.
"While the states signing on the dotted line will trumpet this proposal, the economic reality ... ought to be a bucket of icy cold New England water," says Frank Maisano, a utility industry lobbyist with Bracewell & Giuliani in Washington. "Now comes the hard part:" meeting the pact's emissions targets and hearing from consumers "paying even higher prices."
At the heart of the Regional Greenhouse Gas Initiative (RGGI) is a "cap and trade" program that sets a fixed limit on CO2 emissions. The right to emit the gas then becomes a tradable commodity on Jan 1, 2009. Companies that produce less carbon dioxide can sell their credits to others, giving an economic incentive to cut emissions and sell, rather than buy, credits.
The RGGI caps regional CO2 emissions at 121.3 million short tons through 2014, then cuts them to 10 percent below that level by 2018. Some say the pact will cost households an additional $3 to $24 per year on their electric bills, although the RGGI governors expect new technology and energy efficiency to reduce rates.
Each state in the group - Delaware, Connecticut, Maine, New Hampshire, New Jersey, New York, and Vermont - will get an emissions budget. Massachusetts and Rhode Island backed out of the agreement, though some predict they'll join later.
Most companies that emit CO2 prefer cap-and-trade to regulatory approaches, which they say can require installing costly technologies, or to carbon taxes paid to the government. Cap-and-trade has been credited with helping cut power-plant emissions of smog-forming nitrous oxides and sulfur dioxide in the 1990s.
The Northeast pact is a bit of a thumb in the eye to the Bush administration, which has not endorsed using cap-and-trade for CO2 emissions control (only for mercury emissions). In a global climate-change conference in Montreal last month, the administration instead touted research into emissions-control technology.
Some hope the new pact will be a model for other regions and, in the end, build pressure for a uniform, national program.
"This cap-and-trade idea absolutely will become a national program within a few years," says Jonathan Naimon of Light Green Advisors, a money management firm in Seattle, who has analyzed the effects of a national cap-and-trade program. "Doomsayers who say we will all be ... shivering in the cold because of the cost are overstating the case."
Oregon, Washington, and California are one possible regional combination. Minnesota, Wisconsin, and other states in the upper Midwest tier are another.
"States will be following suit with their own pacts," Mr. Naimon says, "and large companies like Dupont and Alcoa will inevitably demand a national cap-and-trade approach because they don't want a patchwork of different regulations."