Western States Unite For Climate Initiative
MARTIN KASTE: I'm Martin Kaste in Seattle. That auction will also be watched closely here in the west, where seven states are planning a cap-and-trade system of their own, only bigger. The system here will include the whole West Coast, parts of the Southwest and Mountain West, and even four provinces in Canada. David Owens is director of the Arizona Department of Environmental Quality.
Mr. DAVID OWENS (Director, Arizona Department of Environmental Quality): Our program in the Western Climate Initiative is a multisector, economy-wide program that's capturing a whole range of emission sources as well as an overwhelming amount of the emissions that are coming from those sources.
KASTE: Unlike the system back east, which is limited to power plants, the westerners plan to cover almost everything, even homes and cars. Fuel distributors will acquire the pollution credits for their customers, and yet they are surprisingly open to the idea. Dave Arrieta, spokesman for the Western States Petroleum Association, calls the cap-and-trade plan positive.
Mr. DAVE ARRIETA (Spokesman, Western States Petroleum Association): We think market mechanisms is a cost-effective way to implement the program. You know, not that it's going to be no cost, but it's going to be the most cost-effective way to do it.
KASTE: The western states have built a lot of industry-pleasing flexibility into this plan. It'll be phased in gradually, and companies will be allowed to exempt much of their emissions with carbon offsets - planting trees in the rainforest and that kind of thing. Environmental economist Charles Komanoff says the plan makes too many compromises.
Mr. CHARLES KOMANOFF (Environmental Economist): It doesn't do the climate any good to pretend that this palliative of cap-and-trade, with very moderate clampdown in emissions, is an actual solution.
KASTE: Komanoff would prefer to see a carbon tax, essentially a flat fee on every ton of carbon emitted. A tax, he says, would put a clear, predictable cost on carbon but without all the complexity of creating a new financial market for emissions.
Mr. KOMANOFF: You need monitors, you need regulators. And all these people have to be paid. They end up representing interests. There's jockeying for influence. There's money being passed around. You wouldn't have that with a revenue-neutral carbon taxing.
KASTE: Komanoff is especially disappointed that the western states may start their program by giving away, instead of auctioning, most of the emission's credits that companies need to run their operations. Jonathan Karpoff is a University of Washington finance professor with an interest in environmental markets. He says in a cap-and-trade system, those initial credits are worth real money.
Dr. JONATHAN KARPOFF (Professor of Finance, University of Washington): It's a transfer of wealth by just giving these things to the oil refinery.
KASTE: But Karpoff says that may be necessary.
Dr. KARPOFF: If it takes giving these things away to get this thing enacted politically, then it's worth it for society.
KASTE: And getting this enacted will not be easy. Some of the western states will have to get this plan through skeptical legislatures, so industry support is crucial. And if the economy continues to sour, it may be a challenge to keep all the states on board, especially in the absence of any pressure from the federal government. Martin Kaste, NPR News, Seattle.