WXXI: Pollution Credit Auction Set (2008-09-16)

New York is on track to begin the first air pollution cap and trade program in the nation, now that the state's Energy Authority has approved a pilot plan that requires all power plants to buy credits for the greenhouse gas emissions that they create.

The Regional Greenhouse Gas Initiative includes New York and nine other states, which hope to cut power plant emissions believed to cause global warming by 10% in the next ten years.

Under the cap and trade program, power plant operators will be required to buy pollution credits in quarterly auctions held by the participating states, if they want to continue their output of CO2 and other greenhouse gasses.

The theory is that the program will put pressure on power plant operators to clean up their facilities and reduce their emissions voluntarily in order to save money.

Environmentalists hope it will mean cleaner air. Laura Haight, with the New York Public Interest Research Group, says the program will also provide funds for even more energy savings, and more carbon emission reductions.

"Ideally, this money raised from the auctions will go into energy efficiency, clean energy and renewable energy," she said. "Programs that will actually both help consumers and help the environment."

Haight says utility bills might be a little higher, an estimated $.78 a year. But she says it's a very small price to pay for a cleaner environment.

Radmilla Miletich, a lobbyist for the Independent Power Producers of New York, which represents power plan companies, questions what the final cost to consumers and the economy will be.

"It's a brave new initiative," Miletich said. "But at the end of the day New Yorkers need power at a reasonable price."

Miletich says there's no way of knowing how much the pollution credits will cost in the auctions, no limit has been placed on the price, and it will be difficult for companies to budget for the purchases. She warns those costs will likely get passed on to consumers.

Miletich says another concern is that anyone is allowed to buy the pollution credits. She says an environmental fund could buy up the credits and take them off the market for good, or a bank could purchase them and resell the credits to utilities at a steep profit.

"You could just sit on the allowances until the price goes up," she said. "Or you could make them completely unavailable."

The pollution credit program will result in a windfall for the state of millions of dollars. There's likely to be competition for those funds, as the state's budget picture darkens. Democrats in the State Senate have already said the money should be used to help New Yorkers pay for home heating oil. Haight, with NYPIRG, disagrees. She says it would just "burn up the proceeds", and that its better to use the funds to help homeowners make their houses more energy efficient. That way, she says, instead of a one time infusion of aid, they can save money on their heating bills every year.

The first sale of the pollution credits will happen later this month, though New York will not be participating until December. The total amount of carbon emissions will be capped at present levels for five years, and then will be lowered by 10% of that amount by 2019, if all goes as planned.

Officials in New York and the other states in New England and the mid Atlantic region hope the pollution credit program will be adopted by the rest of the country. Congress is considering legislation, and the state of California, a well as several other states and Canadian provinces, are formulating a Western Climate Initiative that would use a cap and trade program to lower greenhouse gas emissions.