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New York and Other States Accelerate Efforts to Address Climate Change
In the absence of federal action on climate change, states are taking the lead in developing their own programs to reduce emissions of greenhouse gases. This client advisory briefly describes the status of the most prominent efforts in New York and other states.
New York and RGGI
Cap and Trade. Ten northeastern and mid-Atlantic states are parties to the Regional Greenhouse Gas Initiative, known as “RGGI,” which aims to reduce carbon dioxide emissions from participating states ten percent below current levels by 2019. The members include Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New Jersey, New York, Rhode Island and Vermont. A non-profit corporation, Regional Greenhouse Gas Initiative Inc. (RGGI Inc.), has been established to provide technical assistance to participating states. The collective carbon dioxide emissions cap is 188 million metric tons. New York will have an initial emissions cap of 64.3 million tons.
The New York State Department of Environmental Conservation (NYSDEC) has released its draft RGGI regulations. Comments are due by December 24, 2007. If the regulations are adopted, power plants that produce 25 megawatts of electricity or more will need to acquire annually sufficient emissions allowances to cover their carbon dioxide emissions, beginning on January 1, 2009.
The State will annually auction allowances for most of the state’s emissions cap of 64.3 million tons. The available allowances will slowly decrease between 2009 and 2019, when New York’s emissions cap will drop to approximately 57.9 million tons. The law contains safety mechanisms, through “offsets,” which will be particularly important if the auction prices for allowances rise too high. The New York State Energy Research and Development Authority (NYSERDA) will use revenue generated by the auctions to promote energy efficiency and renewable energy.
At the end of each compliance period (the initial period is 2009 through 2011) regulated power plants will need to possess enough allowances to cover their emissions. As New York’s carbon dioxide emissions cap decreases, regulated sources will need to reduce their carbon dioxide emissions, compete for a reduced number of allowances or, potentially, reduce or end operations. NYSDEC and NYSERDA will also strictly regulate the program. Regulated sources must designate account representatives, open compliance accounts and retain records of their compliance for at least ten years, among many other regulatory requirements.
Motor Vehicles. RGGI is not New York’s only tool for addressing climate change. Like a handful of other states, New York has adopted California’s Greenhouse Gas Exhaust Emission Standards for motor vehicles. The implementation of these standards is pending approval by the U.S. Environmental Protection Agency.
Renewable Energy. New York has also adopted a renewable portfolio standard. New York’s Public Service Commission issued an order in 2004 requiring regulated utilities to use renewable energy for twenty-five percent of electricity production by 2013. New York already derives almost nineteen percent of its electricity from renewable energy sources like hydroelectric facilities.
Environmental Review. Finally, NYSDEC is currently considering whether and how to require consideration of climate change impacts pursuant to the State Environmental Quality Review Act. A number of environmental impact statements prepared over the past few years have disclosed climate change impacts, although the standard for determining significance and mitigation is still undefined.
Other members of RGGI have proposed or plan to propose regulations. Maryland, for example, has released a lengthy draft rule to implement a cap and trade program. The District of Columbia, an official observer of RGGI negotiations since its inception, has recently indicated that it plans to formally sign the RGGI memorandum of understanding.
California has moved more aggressively than other states to address climate change. Its multi-faceted approach includes a cap on carbon dioxide emissions, limits on greenhouse gas emissions from new motor vehicles, a renewable portfolio standard, ending use of power plants with high greenhouse gas emissions (i.e. coal-fired plants), and addressing climate change in environmental impact review.
A number of western states and Canadian provinces have also formed the Western Regional Climate Action Initiative. By agreement, the members pledged to reduce greenhouse gas emissions to fifteen percent below 2005 levels by 2020. The states will likely use a cap and trade program to implement this pledge.
Scientists are increasingly certain of the link between rising global temperatures and greenhouse gas emissions. The federal government has responded slowly, focusing on voluntary programs and substantial tax credits and grants to promote renewable energy. It continues to debate other proposals like a new energy bill, cap and trade programs, motor vehicle efficiency standards and a national renewable portfolio standard. In the meantime, state-led efforts are already changing the way business is conducted in the country.
Questions about this client advisory may be directed to Clifford P. Case (firstname.lastname@example.org), Christine Fazio (email@example.com) and Christopher Rizzo (firstname.lastname@example.org). See http://www.clm.com for more information.
 This advisory does not report on a number of other state initiatives on climate change and renewable energy. They include state tax incentives, grants and other efforts to promote the growing “voluntary” renewable energy sector.
 Greenhouse gases include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Although CO2 is not the most potent greenhouse gas, it is the most prevalent. RGGI only regulates CO2 emissions.
 Carter Ledyard & Milburn LLP assisted in the formation of RGGI Inc. and has been retained to provide legal services to it.
Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
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© Copyright 2007