Regulated and Voluntary Carbon Markets

Individual States Initiate Carbon Emissions Regulatory Processes Several states have initiated their own regulatory processes. In 1997, Oregon enacted the Oregon Standard, the first regulation of CO2 in the United States. The Oregon Standard requires that new power plants built in Oregon reduce their CO2 emissions to a level 17% below those of the most efficient combined cycle plant, either through direct reduction or offsets. Plants may propose specific offset projects or pay mitigation funds to The Climate Trust, a non-profit created by law to implement projects that avoid, sequester or displace CO2 emissions. California’s Global Warming Solutions Act (AB 32) is the first US state-wide program to cap all GHG emissions from major industries that includes penalties for non-compliance. Under the Act, the California’s State Air Resources Board (CARB) is required to create, monitor and enforce a GHG emissions reporting and reductions program. CARB is authorized to establish market-based compliance mechanisms to achieve reduction goals. There is a strong possibility this will include other US States. California has also joined five other states (New Mexico, Oregon, Washington, Arizona, Utah) and two Canadian provinces (British Columbia, Manitoba) in the Western Regional Climate Action Initiative (WRCAI), which formed in February, 2007, and is expected to announce an overall regional reduction goal by August 2007, followed by a market-based reduction mechanism within one year. In mid- 2007 thirty-one US states signed onto The Climate Registry. Like the California Climate Action Registry, this Multi-State-and-Tribe Registry was created to “provide an accurate, complete, consistent, transparent and verified set of greenhouse gas emissions data from reporting entities, supported by a robust accounting and verification infrastructure.” This registry was developed to facilitate regulatory or voluntary reporting. While the Registry is not currently being utilized by a cap-and-trade system, it will likely become part of such an initiative. Moreover, the popularity of this initiative signals that such registries will likely continue to play a key role in the United States, not only in potential regulatory markets but also on the voluntary front. States which have signed on to the Registry have agreed to a series of goals including, “to establish and endorse a voluntary entity-wide greenhouse gas emissions reporting and verification system.”