Northeast States Unite to Curb Warming

Historic pact puts region on path towards energy independence

Posted: 20-Dec-2005; Updated: 20-Dec-2005

The negotiations were difficult -- and at times acrimonious. But in December the governors of seven northeastern states hunkered down on a conference call and hammered out a historic agreement to cut greenhouse gas emissions from power plants.

The Regional Greenhouse Gas Initiative (RGGI) is the nation's first multistate cap-and-trade system for carbon. "This is a critical step toward developing a national policy on global warming and positioning the Northeast to take advantage of the growing opportunities with clean technologies" says our president Fred Krupp. (Read the multi-state RGGI agreement.)

With the Bush administration increasingly isolated in its stance on global warming, states and businesses are stepping into the breach. The action by northeastern states allows the region to begin catching up with the rest of the industrialized world.  Environmental Defense played a critical role in making this happen. We served on New York Governor George Pataki's task force that initiated the process in 2003.

Creating a Carbon Market

Under the plan, power plants in the seven states -- Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont -- will be required to cut carbon dioxide 10% by 2020. Electric utilities will decide among themselves which of the nearly 200 power plants should make the largest cuts, creating an emissions-trading market to achieve the required reduction at lowest cost. This mirrors the successful acid rain provisions of the 1990 Clean Air Act we helped design.

"Environmental Defense has been a consistently positive force, finding ways to bridge gaps between industry and the environmental side," notes Franz Litz, New York State coordinator of climate change policy.

The accord was nearly derailed when Massachusetts Governor Mitt Romney sought to include price controls on the power plant program, which would have discouraged innovation. Environmental Defense argued adamantly for a firm emissions cap and a robust market. Several of our board members and strategic partners weighed in with governors at key moments to keep the rules strong. Our efforts paid off.

An Environmental and Economic Boon

Although Massachusetts and Rhode Island backed out, the remaining seven states forged a strong bipartisan pact. The cap-and-trade approach gives companies an incentive to find the least-cost pollution reductions. "Far from breaking the bank, RGGI is a winner for the states' economies and for consumers' bottom line," says our attorney Jim Marston.

Participating states already have begun deploying plans to cut their emissions -- and not just from power plants. Several, including New York, recently adopted California's landmark greenhouse gas law for cars and pledged to increase reliance on renewable energy such as wind power.

The support for RGGI in corporate boardrooms and on Wall Street reflects the realization of many companies that some form of cap on carbon emissions is inevitable. "The regulations will change someday," Cinergy CEO James E. Rogers told Business Week. "And if we're not ready, we're in trouble."

The initiative serves as a model for other states and has ratcheted up the pressure for a national law. California, Washington and Oregon are exploring a similar agreement. "The Northeast will be an important proving ground," says Marston. "This initiative sets up a legal and technical framework for how a national program might work."