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Clean Power Plan not expected to spark Calif. gold rush for trading credits


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Clean Power Plan not expected to spark Calif. gold rush for trading credits

Experts do not anticipate that many states will rush toobtain emissions credits from California's well-oiled cap-and-trade program inorder to comply with the U.S. EPA's Clean Power Plan.

California requires that linking programs be at least asstringent as its own program, and an attorney involved in litigationchallenging the carbon rule predicted that many states will be unwilling tomeet that high bar. But without a trading relationship with California, AllisonWood with Hunton & Williams warned, states may have a difficult timemeeting their Clean Power Plan goals.

Speaking at the Bipartisan Policy Center, Wood, who arguedon behalf of industry trade group Utility Air Regulatory Group during Sept. 27oral arguments on the legality of the Clean Power Plan, said that while therule may not require states to work together, it forces them to do so anywaybecause the goals are unachievable within the borders of some states.

For instance, Wood said a state like Montana cannot meet itsgoals without using credits from a state like California. She called thesituation unfair for coal-fired power plant-dependent Montana, which has only ahandful of small gas turbines, the largest of which is 's 144-MW power plant,according to SNL Energy data.

"[Montana] would have to acquiesce to some of thedemands of other states if those states won't trade with it, because they viewit as a dirty state, for want of a better term," Wood said.

Dave Clegern, a spokesman for the California Air ResourcesBoard, said his state has a duty to protect its trading program from a flood ofcheap credits that could undermine the goals of the program. "We arecertainly willing to look at programs other states develop, but we have our ownregulatory targets we have to hit, and can't link with another program thatmight jeopardize those," Clegern said in an email.

But David Doniger, director of the Natural Resources DefenseCouncil's Climate and Clean Air Program, said Montana does not have to useCalifornia's credits but instead could develop its own wind facilities orinvest in renewables in other states and retain the associated credits.Montana's "neighboring states, North Dakota and others are the SaudiArabia of wind," Doniger said.

Center for Climate and Energy Solutions Senior Fellow AshleyLawson said in an interview that states have many other reasons to look beyondCalifornia's program. For instance, she observed that California's tradingscheme involves economy-wide emissions and the state regulates a wider array ofgreenhouse gases than just carbon, so any state wishing to link up would likelyneed to do the same.

In addition, Lawson said California's recently proposedcompliance plan showsthat the state intends to use its cap-and-trade program — a state measures plan— to comply with the rule, but this makes the plan incompatible with the EPA'smodel, mass-based trading program.

"If California goes with this state measures [plan] …it's not going to be importing or exporting credits into other Clean Power Planimplementation plans," Lawson said. That means if a state intends to linkwith California, it would have to build a nearly identical program and submitit to the EPA as a state measures plan. Only then could they both trade withCalifornia and comply with the Clean Power Plan.

Clegern said California is open to other state approachesand has had a few preliminary discussions in this regard. "A linkage wouldnot necessarily require a program with the breadth of California's, but therequirements for whatever piece(s) might match up would need to at least meetwhat we require in our regulation," he said.

The only other jurisdiction currently trading withCalifornia is the Canadian province of Quebec, and the linking process took afew years to complete as the province proved to the California governor thatits program was strong enough. Any additional linkages would require thegovernor to issue the same stringency finding as was done for Quebec. Clegernsaid the state is undergoing a public process to add Ontario.