Carbon Trading Finds a Foothold in At Least 20 States

Beneath the political storm raging around the Obama administration's climate change rules for the electricity sector, a quiet but powerful push for carbon trading is spreading across the nation.

Close to half of states, including many run by Republicans, are hoping to use some form of a carbon market similar to cap and trade to meet federal Clean Power Plan targets, according to a ClimateWire review of high-level planning talks.

In at least 20 of the 47 states that must meet U.S. EPA requirements, top policymakers or major utilities are pushing for a system where power generators could purchase carbon allowances or credits across state borders as a way to meet EPA's goals.

Power plants in nine Northeastern states already voluntarily participate in a carbon-trading regime, and California runs its own economy wide system.  But even in states like Arizona, North Carolina and North Dakota -- whose governors are staunch opponents of the Clean Power Plan -- the key players increasingly see trading as the most attractive way to regulate carbon produced by power plants if the rule prevails against court challenges.

"You can do this without using markets, but it is, put simply, really hard to do at a low cost," said David Hoppock, senior policy associate with Duke University's Nicholas Institute for Environmental Policy Solutions, a group that has been coordinating compliance discussions among Southeastern states.

Under the Clean Power Plan, carbon emissions from power plants in the United States would fall 32 percent below 2005 levels by 2030.  Each state must write a plan to achieve a certain portion of that 32 percent, and even most states opposing the rule are analyzing carbon-cutting options. Those include ramping up renewable energy, running more natural gas plants instead of coal-fired facilities and using electricity more efficiently.

Discussions at the state level are still in the early stages.  But interviews with dozens of experts, power companies and state officials indicate the writing is on the wall:  If the Clean Power Plan survives, most states will use interstate carbon markets to cut greenhouse gas emissions.

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