US: California and RGGI unlikely to link, officials say

26 February 2014 00:35 Source:ICIS

California’s carbon market is unlikely to link with the Regional Greenhouse Gas Initiative (RGGI) in the future and any potential expansion would rather happen in the West, officials from both schemes said on Tuesday.

Structural differences and major price discrepancies would make difficult any link with RGGI, the US’s first carbon cap-and-trade scheme, said Mary Nichols, chairwoman of the California regulator Air Resources Board (ARB).

California carbon allowances are trading in the high-$11.00 tonne of CO2 equivalent (tCO2e), almost three times higher than the $4.00/tCO2e RGGI allowances are valued at, traders said.

“It is not clear what the benefit [of a linkage] would be,” she said on Tuesday at the Climate Leadership conference in San Diego, California.

David Littell, commissioner at the Public Utilities Commission of Maine, one of the states part of RGGI, said a link does not make sense at this time.

RGGI, which includes nine states in the northeast, only covers emissions from power plants, while the California scheme is much broader, including the industrial and the electricity sectors.

Open to expansion

Both officials said the programmes are open to future expansion.

Nichols added it would be natural for the ARB to look for ways to have stronger linkages. “Other states have begun to ask questions. When [Environmental Protection Agency] EPA’s rules come out, it will only accelerate that.”

EPA is expected to publish in June rules on how to limit carbon emissions from existing power plants. Market participants polled by ICIS believe those rules could spur other states to join regional carbon programmes.

Janet McCade, the EPA’s acting assistant administrator for air and radiation, said states are “very interested” in joining regional approaches to comply with EPA upcoming regulations. She said the market approach to carbon reductions is still on the table, and she strongly hinted that the EPA would give states flexibility to adhering to any proposed rules.

“[States] want the ability to join a regional approach, but they don’t want to be told they have to,” she said.

The EPA official stressed that rules for new power plants will be different from rules for existing power plants. She noted that carbon capture, which was part of rules for new power plants, would not be reasonable for existing power sources. Dan X. McGraw

By Dan X. McGraw