Tuesday, January 26, 2010

Coming Soon to a State Capitol Near You: Climate Change

Having come up empty in Copenhagen and facing defeat in the U.S. Senate, advocates for climate change legislation are retreating to the states.

No meaningful progress on an international climate change treaty was made at the Copenhagen Climate Change Conference. Key members of the U.S. Senate now predict that cap and trade won't see the light of day this election year either. But in our state capitols, proponents of carbon regulation are plowing ahead.

At the end of 2009, 11 northeastern states committed to develop a low-carbon fuel standard (LCFS) for their region. These states make up the Regional Greenhouse Gas Initiative (RGGI), which has already imposed a cap-and-trade program for electric utilities. The result: these states have the highest retail electric rates in the country (http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_b.html). Now they want to create an LCFS, which will drive up gasoline and diesel costs for consumers.

Not to be outdone, the Midwest Governors Association has made design recommendations for a cap-and-trade system and is preparing recommendations for an LCFS for the six states participating in its Greenhouse Gas Emissions Accord. Meanwhile, Minnesota and Michigan have introduced LCFS legislation, while Wisconsin is set to begin debating an omnibus climate change bill.

You won't be surprised to learn that western states are pursuing similar policies on a regional level and individually. Oregon passed LCFS legislation last year and now Washington is also considering establishing one.

And then there is California, the state responsible for developing these questionable policies. California’s LCFS goes into effect next year and its cap-and-trade program starts in 2012. Those two policies are the flagship programs for The Golden State’s climate change efforts and the success or failure of these actions in California will influence state-level activity across the country.

Other states should be wary of following California’s lead. California has proven to be a shining example of fiscal mismanagement, and is well on its way to legislating itself into junk bond status. Many of the impending climate regulations in that state are causing manufacturers to seriously consider closing shop for good or relocating their operations. In order to prevent further harm to the economy, one California state legislator is currently getting signatures to put an initiative on the ballot for the next election that would bar the state’s cap-and-trade program from going into effect until the state’s unemployment rate dips below 5.5 percent (the state’s unemployment rate is currently 12.3 percent, third highest in the country).

China and India made it clear in Copenhagen that they have no intention of committing to binding emission reductions. They would not even agree to international monitoring, reporting and verification of their emissions.

Most states are facing continued budget deficits and high unemployment. Climate policies that make businesses less competitive with other regions of the country and -- more importantly -- the world won’t help the situation. We need to make sure our state leaders understand that piecemeal policy is bad policy.

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