Arizona Quits Western Cap-And-Trade Market;
Utah Mulls Similar Move
February 13 , 2010
By Cassandra Sweet, Wall Street Journal, February 13, 2010
SAN FRANCISCO - (Dow Jones) - Days after Arizona pulled out of a western cap- and-trade market, Utah lawmakers were considering a proposal Friday, February 12, to follow suit, potentially weakening the fledgling regional carbon market.
In an executive order signed last week, Arizona Gov. Jan Brewer, a Republican, rescinded the state's agreement to participate in the Western Climate Initiative cap-and-trade market, scheduled to start Jan. 1, 2012, citing concerns about the economy and the program's costs. On Friday, a Utah House panel passed a resolution asking the state's governor to do the same thing.
Carbon market participants said Arizona's departure could weaken the WCI's nascent regional cap-and-trade market, though it hasn't had any impact on the existing carbon market.
"It's changed the political landscape a little bit," said John Battaglia, a carbon broker at Evolution Markets in San Francisco.
Arizona may be the first in what could be a string of defections from the WCI cap-and-trade market, as federal climate legislation stalls in the Senate and as politicians focus on jobs and the economy. Of the 11 U.S. states and Canadian provinces that are members of the WCI program, only four have adopted legislation that would allow them to participate in the cap-trade-market: California, British Columbia, Ontario and Quebec. Manitoba officials said in December they're pursuing climate legislation that will allow the province to participate in the WCI market.
But the outlook for other U.S. states joining the market is uncertain. Although Oregon, Washington, Montana and New Mexico are members of the WCI market, they haven't adopted cap-and-trade legislation that would allow them to participate in it.
Arizona and WCI officials didn't immediately return phone calls seeking comment.
The WCI aims to cut greenhouse-gas emissions 15% below 2005 levels by 2020. Participating states and provinces must establish legislation that caps emissions from most polluting sources, and reduce the cap over time. Owners of power plants, refineries and other facilities could either physically cut their emissions or buy emission-reduction allowances and credits from other companies that have cut more than their required amount.
California regulators are working to finalize draft cap-and-trade rules by the end of this year, although concern about the program's costs has fueled resistance to the plan as the state struggles with recession and unemployment. A California legislator has introduced a voter initiative that would halt the cap- and-trade program until unemployment falls to 5.5%, while business groups have implored regulators to carefully consider costs as they complete a delayed review of the plan's economic consequences.
Former Arizona Gov. Janet Napolitano, a Democrat, helped establish the WCI in 2007. Napolitano is currently U.S. Secretary of Homeland Security.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@ dowjones.com
Copyright (c) 2010 Dow Jones & Company, Inc.
