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Cap-And-Trade Is Coming To The West

Don't look now, but cap-and-trade is coming to the United States—and there's nothing the Senate can do about it. Earlier today, California, New Mexico, and three Canadian provinces—Ontario, Quebec, and British Columbia—unveiled a plan to set up a carbon-trading system for greenhouse gases by January 2012. This is all part of the multi-state Western Climate Initiative, a partnership that was set up in 2007, and you can read all the gory details of the new program here.

This new cap-and-trade system will be somewhat different from RGGI in the Northeast, which only covers power plants and has a fairly low price on carbon that's mainly just used to raise money for efficiency programs. This cap would be the real thing, covering most large industrial facilities as well as the transportation sector (that last is probably the biggest source of emissions in most of these states, which aren't particularly coal-heavy, and transport wouldn't get regulated until 2015). All told, the program would aim to cut overall emissions in the five participating states/provinces 15 percent by 2020—roughly in line with the U.S. Copenhagen goals.

Granted, the success of this new carbon cap will depend on the political situation in the participating states. The program is already a lot smaller than was initially envisioned: Arizona, Utah, Washington, Oregon, Montana, and Manitoba are also "partners" in the Western Climate Initiative, but their governors have all opted out of the carbon-trading system for now. And it's possible that the remaining cap-and-trade guinea pigs could balk, too. If, for instance, Meg Whitman wins California's governor's race, she's already promised to delay the implementation of the state's sweeping climate law, AB 32. (There's also a fossil-fuel-backed ballot initiative this fall to kill off AB 32 entirely.)

But assuming this system does get up-and-running, it could well help seed a larger national climate program down the road. The WCI recently commissioned an economic study of the carbon cap and found that the system would save participants some $100 billion in fuel costs by 2020. If other WCI partners see that cap-and-trade isn't actually triggering economic doom and havoc, they too could join in. And suddenly you have the makings of a pretty significant system. So this is definitely a story to watch.