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A Changing U.S. Climate

Fortnightly Magazine - February 2005


The states are getting into the act on greenhouse emissions, and the power industry is getting more proactive. What policy measures are appropriate?

A growing number of U.S. utility companies have come out in favor of federal mandatory limits on emissions of carbon dioxide (CO 2) from their facilities. Edison International's Chairman John Bryson recently called for a comprehensive national program to address global warming; eight companies constituting the "Clean Energy Group" support national "four-pollutant" legislation that would among other things seek to stabilize carbon emissions at 2001 levels by 2013; and Cinergy has voiced its support for mandatory limits on carbon emissions. Cinergy, which relies heavily on coal, is among the companies named in the landmark public nuisance lawsuit filed last July by a coalition of eight state attorneys general, led by New York's Eliot Spitzer. Furthermore, shareholder pressure has forced Cinergy and other companies to examine their risks related to climate-change regulation. Finally, companies doing business in states with mandatory carbon caps under development, such as those in Regional Greenhouse-Gas Initiative (RGGI) states, would rather have federal regulation extend those limits to the entire industry, thereby leveling the playing field on a national scale.

Proponents of mandatory carbon limits-though increasing in number-still constitute a minority within the utility industry. Most utilities prefer voluntary greenhouse-gas (GHG) emissions reductions ,or take the view that CO 2 should not be considered a pollutant at all. Yet if the current momentum continues, the utilities calling for mandatory GHG regulation will continue to grow. Shareholder resolutions, litigation, public scrutiny and state actions to regulate GHGs all contribute to this drive. This article provides an overview of the state regulation trend; actions taken by the utility sector to address GHG emissions; and industry views on proposed mandatory GHG caps to be implemented at the federal level.

Overview of State Climate Change Actions

Twenty-eight states have set forth plans to combat climate change by reducing their net emissions of GHGs, implementing policies that vary in scope and stringency. One example: seven states (New York, New Jersey, Rhode Island, Connecticut, Massachusetts, Maine, and Vermont) have adopted or have stated intentions to adopt California's requirement that automakers cut global-warming emissions from new vehicles by more than 29 percent in the next decade. Together these eight states comprise 26 percent of the American auto market, a portion large enough to cause automakers to re-evaluate the efficiency of their fleets on a national scale. 1

Electric power generation accounts for approximately one-third of GHG emissions nationally, according to the Department of Energy's Energy Information Administration. Accordingly, in addition to targeting vehicle emissions, much of the recent effort by states has focused on the utility sector. More than a dozen state legislatures have passed renewable energy mandates, which require a specific percentage of electricity produced to come from renewable sources.

In November 2004, Colorado citizens became the first in the country to pass such a mandate by state initiative, requiring major utilities to produce 10 percent of electricity output from renewables by 2015. Twenty-three states collect revenue from utilities