CO2 Regulation On The Horizon?

March 20, 2006
It's not a matter of if mandatory regulation of U.S. carbon dioxide emissions occur, it's a matter of when. At least that's what many companies believe, experts say.

"A lot of people are thinking that there's going to be some kind of carbon-emission-reduction requirement in the U.S., not withstanding the policy of the current administration," says Ronald S. Borad, a structured finance lawyer with law firm Brown Rudnick Berlack Israels LLP and a member of its Climate and Energy Group.

Lisa Grice, vice president of greenhouse gas management services for CH2M Hill, Denver, says she has heard the same sentiment. Regulation will occur, if not at the federal level, then on a regional basis, or even state by state.

Indeed, there's plenty of reason to believe such regulation will occur, even absent a move by federal regulators. Both Borad and Grice point to the Regional Greenhouse Gas Initiative (RGGI) as one example of a regional initiative to regulate CO2 emissions. This multistate initiative by Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont aims to reduce greenhouse gas emissions using a cap-and-trade program with a market-based emissions trading system. The first compliance period for RGGI is slated to begin in 2009. Only power plants covered by RGGI must comply with the program's requirements.

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However, RGGI "has made it clear that power plants are the first step," Grice says.

And regulation of carbon dioxide emissions in California will occur sooner, says Chris Walker, managing director of sustainability business development for Zurich-based reinsurer Swiss Re.

Grice says that at least one power company would prefer, if regulation of CO2 emissions is inevitable, that it occur at a national level. Why is that? To eliminate the patchwork effect of varying regulations, Grice says. "New plants are hugely expensive," she notes.

That's not to say mandatory regulations are desired. "With a mandatory program, who knows what's going to happen?" says Russell Jones, research manager, American Petroleum Institute. "You [could] have people coming in, basically telling you how to run your plant in ways that conceivably wouldn't make sense. It's better to have your people focus on these issues."

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