Block’s Indicator of Sustainable Growth

by Ray Block

President Obama met the UN Secretary-General Ban Ki-Moon at the White House (March 9 2009), on the potential for stepped up cooperation between the UN and United States on climate change. During their talks, the two leaders underscored the importance of reaching an international agreement on climate change, to both save the planet and promote sustainable economic recovery.

Meanwhile, the US Environment Protection Agency (EPA) has proposed a comprehensive system for a US-wide mandated reporting on emissions of carbon dioxide (C02) and other greenhouse gases (GHG). This is a step closer to a national cap-and-trade emissions scheme.

The new reporting requirements replace the previous voluntary self reporting standards under the Bush EPA. The new rules would apply to suppliers of fossil fuels and industrial chemicals, manufacturers of mobile sources, such as motor vehicles and engines, as well as large direct emitters of GHG, with emissions equal to or greater than a threshold of 25,000 metric tons per year.

Approximately 13,000 facilities, accounting for about 85 to 90 per cent of GHG emitted in the US, would be covered under the proposal. The first annual report would be submitted to the EPA for calendar 2010, except for vehicles and engine manufacturers, which would begin reporting for model year 2011.

The manufacturers will need to report both on the emissions from their production facilities, as well as provide GHG emissions data on engines and vehicles.

The first cap-and-trade scheme in the US started on January 1 2009, with the beginning of the Regional Greenhouse Gas Initiative (RGGI), in which the 10 north eastern and mid-Atlantic states agreed to a cap-and-trade scheme limited solely to carbon dioxide emissions from electric power stations generated in their combined area.

TGwo quarterly RGGI auctions of emissions permits, or allowances as they are called, have been put up for sale through the Climate Futures Exchange,  prior to the commencement of the scheme. This was in September and December 2008. As Environmental News Service (www.ens-newwire.com March 9 2009) pointed out: “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.”

The third set of allowances will be auctioned off later in March 2009, again through the Climate Futures Exchange. But Governor Davis Paterson of New York State, the largest region in RGGI is reconsidering the rules (New York Times March 6 2009), which would reopen state regulations ro allow power plamts leeway to release greater amounts of emissions at no additional cost.

The Governor is concerned the rule might unfairly burden the energy sector at a time of deep recession. The environment movement is up in arms. If New York changes the rules, this might lead to a partial breakup of the RGGI scheme.

This accentuates the need to have a US-wide scheme, rather than a grouping od states, where the rules can be changed by one or two powerful states to suit the political occasion.

The other regional state initiative to plan for a cap-and-trade scheme involves the Western Climate Initiative, where a grouping of seven US states and four Canadian provinces, led by California will commence their carbon emissions scheme in 2012. The current aim is to have the states and provinces start to monitor emissions in 2010 and reporting them in 2011, prior to the commencement of the scheme.