Midwest governors group sets greenhouse gas goals

 

By ELIZABETH DUNBAR , Associated Press 

 

Last update: June 8, 2009 - 4:12 PM

 

MINNEAPOLIS - The group charged by six

Midwestern governors to come up with an

emissions cap-and-trade system is

recommending aggressive reduction goals

that could bring big changes to a region that

relies heavily on coal and manufacturing.

 

The plan calls for a nearly 20 percent

reduction in greenhouse gas emissions from

2005 levels by 2020, with an 80 percent

reduction by 2050. The group gave The

Associated Press a copy of the

recommendations ahead of publicly

releasing them later this week, then sending

them to Congress.

 

While the group prefers a federal cap-and-

trade system, the recommendations give

governors in the Midwest a possible

framework for a regional system should

Congress fail to act by 2012.

 

Meanwhile, the group hopes the

recommendations become part of the

national climate change debate. While seven

Western states and 10 Northeast and Mid-

Atlantic states have already crafted regional

cap-and-trade systems, the new

recommendations represent the first major

effort to develop such a system in the

Midwest.

 

"We realized that if we didn't participate,

the coasts were going to decide what climate

change policy will look like," said Jesse

Heier, a spokesman for the Midwestern

Governors Association.

 

The recommendations are the result of a

2007 agreement between the governors of

Illinois, Iowa, Kansas, Michigan, Minnesota,

Wisconsin and the premier of Manitoba to

establish reduction targets and design a

cap-and-trade system. The appointed

representatives from utility, agriculture,

industrial and environmental interests has

been working on the plan for the past year

and a half.

 

Carbon cap-and-trade systems aim to

reduce greenhouse gas emissions with

financial incentives. Government regulators

cap the amount of carbon individual

companies can emit. If a company needs to

emit more, it has to buy credits from others

that have less emissions.

 

While the Midwest reduction goals are

 similar to those currently being debated in

Congress, the group recommends a slightly

different way of achieving them. Most of

their allowances for emissions would

initially be sold for a small fee to help ease

the cost of the transition to both industry

and consumers. Some of that revenue would

be invested in new technology that could

help meet the reduction goals.

 

Legislation introduced in Congress, in

contrast, begins with free allowances that

eventually are bought and sold on the open

market. The Midwest plan covers more

economic sectors than the Northeastern

system, which is already in effect but

focuses on the power industry. And unlike

the Western system that phases in different

sectors of the economy, the Midwest brings

them in all at once.

 

Franz Litz, a senior fellow at the World

Resources Institute who has followed

climate change policy, said the Midwest

proposal takes the middle ground in how it

handles the allowances.

 

"There's a big debate: Do we auction

(allowances) and make polluters pay, or do

we give them all away?" he said. "The

Midwesterners took a very practical

approach."

 

The recommendations also include a system

where companies could reduce some of their

emissions by buying credits from farmers or

foresters who develop an ability to store

carbon.

 

The so-called offsets along with

investments in innovation could make a

carbon cap-and-trade system possible in

the Midwest, said Judi Greenwald, vice

president for innovative solutions at the

Pew Center on Global Climate Change.

 

"They've got a lot of the energy-intensive

industries, a lot of coal, a lot of emissions.

They also have biofuels, carbon capture and

storage, and a lot of wind," Greenwald said.

"If they can position themselves to provide

climate solutions, they stand to gain."

 

All economic sectors except for agriculture

and forestry would be included in the

system. Most small businesses would be

exempt, as the program includes only

entities whose annual emissions are 25,000

or more metric tons, said David Miller, a

member of the advisory group. (As a

measure of comparison, a typical coal-fired

power plant emits millions of metric tons

annually.)

 

But Miller, director of research and

commodity services at the Iowa Farm

Bureau, said that doesn't mean farmers,

small businesses and even consumers won't

see the effects of the system.

 

"The expectation is that over time, energy

would get 15-20 percent more expensive,"

Miller said.

 

The Midwest group attempted to craft a

plan that would do a good job of mitigating

cost increases, said Roy Thilly, CEO of

Wisconsin Public Power Inc. and member of

the group. But a cap-and-trade system can't

be effective without improvements in energy

efficiency and conservation, Thilly said.

 

"We waste a tremendous amount of energy.

We can't afford to do that. We can't afford it

to stay competitive," he said.

 

The group's recommendations could change

later this year after in-depth modeling

shows the strategy's economic impact.