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State Cap and Trade Proposed

By Michael Hartranft
Copyright © 2010 Albuquerque Journal
Journal Staff Writer

          With cap-and-trade legislation bogged down at the federal level, the state Environment Department wants a New Mexico-only greenhouse gas emissions program adopted this fall.
        The department said it intends to file a proposed cap-and-trade regulation with the state Environmental Improvement Board in June and request a hearing to consider it in September.
        In general, the state would set greenhouse gas emission caps based on its reduction goals. Companies would be allowed to exceed state-set emissions caps by buying "allowances" from others that reduce their emissions more than required.
        Critics argue that a cap-and-trade program will drive up the cost of electricity and other fossil fuel energy sources, and say they make no sense at the state level.
        The Environment Department announcement this week was accompanied by a lengthy and highly technical "white paper" on the program and solicitation for public comment regarding the basis for the cap, distribution allowances and rate of cap reduction.
        It did not address potential costs or economic impact.
        "It's important for the Environmental Improvement Board to adopt a cap-and-trade program that will best suit the needs of our state," Environment Department Secretary Ron Curry said in a news release. "This paper helps to clarify the options that are available to us."
        PNM has supported one version of cap and trade at the national level, but generally has opposed state-only greenhouse gas emissions policies.
        PNM spokesman Don Brown declined comment on the Environment Department proposal, saying the utility has not reviewed it.
        The expected Democratic nominee for governor, Lt. Gov. Diane Denish, said in a statement she was "against additional restrictions that could put New Mexico at an economic disadvantage or in any way hurt job creation.
        "Climate change is a serious issue ... but in these tough times, we simply can't ignore the impact that new regulations might have on New Mexico's job creators," Denish said, according to her office.
        The initiative is in response to an earlier executive order by Gov. Bill Richardson.
        Five Republicans seeking their party's nomination for governor all categorically opposed the move.
        The cap-and-trade mechanism is one of a number of steps New Mexico plans to achieve the greenhouse gas emission reductions called for in a 2005 executive order issued by Richardson: a reduction to 2000 levels by 2012, and 10 percent below that level by 2020.
        Under that mandate, New Mexico has been working on a regional cap-and-trade program with six other states and four Canadian provinces — a coalition known as the Western Climate Initiative — since 2007.
        The group announced its design recommendations for the program in September 2008.
        "Traditionally, we regulate air pollutants through command and control where everyone has to reduce," said Sandra Ely, environment and energy policy coordinator for the Environment Department. "But a market-based mechanism will provide flexibility and the least cost option for reducing pollutants."
        National picture
        National climate change legislation has stalled.
        The House last summer passed the Waxman-Markey bill with a cap-and-trade provision that was supported by industry groups, including PNM.
        But the Senate has yet to act on a bill. Energy committee chairman Jeff Bingaman, D-N.M., supports cap and trade but doubts there are enough votes to pass it in the Senate.
        In fact, the possibility of action is "so tenuous now, the states and provinces feel the need to move forward," Ely said.
        Under the Western Climate Initiative recommendations, the cap-and-trade program initially would apply to sources that emit at or above 25,000 metric tons of carbon dioxide a year per source.
        Ely said the department plans to come out later this year with more precise "quantification" measures. The white paper, however, identifies about 63 sources under the EIB's jurisdiction that might emit greater than 25,000 tons of carbon dioxide a year, including power plants operated by PNM, Tri-State Generation and Transmission Association, Xcel Energy, and El Paso Electric.
        It would also affect a number of compressor stations, refineries and natural gas plants across the state.
        Bernalillo County, which has its own air quality program, and Indian lands are outside the EIB's jurisdiction.
        The Environmental Improvement Board also is considering a petition for capping greenhouse gas emissions submitted by the New Energy Economy, with a goal of reducing emissions by 25 percent below 1990 levels by 2020. Technical hearings on the controversial proposal are planned to start in June.
        The white paper can be viewed at www.nmenv.state.nm.us/cc.

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