As soon as President Obama’s Clean Power Plan enters into the Federal Register, states will have up to two years to craft their plans to meet the EPA’s regulations for carbon pollution from power plants. There are a lot of ways states can go about meeting the targets set for them by the EPA — one of the real selling points of the plan, from the EPA’s perspective, is its flexibility in allowing states to craft individual approaches that work best with their unique energy infrastructure.
But power structures in the United States aren’t just set up on a state-by-state basis. Across the country, different regions handle their energy needs in different ways, depending on the utilities that operate in that region and the resources available. Sometimes, those regions band together to create markets for energy — like the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and the Western Climate Initiative (WCI) between California, Quebec, and British Columbia.
According to both private and government sources that spoke with ThinkProgress, it’s unlikely that the Clean Power Plan will immediately inspire Western states — mainly California, Oregon, and Washington, but also potentially Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming — to join into any sort of formal RGGI-like pact. But that doesn’t mean that those states — and the utilities that operate there — aren’t looking at each state’s Clean Power Plan as a chance to build some kind of regional energy market across the West.
“There has been a lot of discussion particularly in the West, where states are more loosely connected across the electricity grid, about an arrangement where states could adopt some common elements, and thereby allow the compliance entities in that state to trade among states that might not have submitted a joint plan but still have common elements in their plans,” Colin McConnaha, greenhouse gas specialist with the Oregon Department of Environmental Quality, told ThinkProgress.
Unlike formal agreements, like RGGI or WCI, trading through the Clean Power Plan wouldn’t have to undergo legislative approval. Under the final plan, states would simply need to include certain “trade ready” elements — things like common measurements and common tracking systems to ensure that all compliance credits swapped between states are properly accounted for across state lines.
This could help states with few people and lots of, say, wind power, more easily sell energy to states with more people and less wind power, while collaborating to close the dirtiest coal plants. The only thing that states looking to implement a trading-ready plan need to have approved by the EPA would be the emission allowance and tracking scheme — any individual trading plans don’t have to go through the EPA.
There was speculation as to whether or not the EPA would include the idea of “trading-ready” plans in the final CPP — in the final plan itself, the EPA states that it received “numerous comments
… from industry, states, and other stakeholders in this rulemaking that … encouraged EPA to facilitate trading across state lines through the use of trading-ready state plans.” Under the final plan, states can adopt trading-ready plans to participate in the trading of emission credits between power plants in multiple states without opting into a formal agreement like RGGI or WCI.
That’s something that could appeal to multi-state utilities that operate across Western states — like Puget Sound Energy, which owns both natural-gas fired plants in Washington as well as part of the Colstrip Generating Station in Eastern Montana. This coal-fired facility was the eighth-largest greenhouse gas emitter among power plants in the United States in 2010, according to the EPA. Utilities in Oregon, like Portland General Electric, function similarly, owning natural gas and hydro-powered plants in Oregon, wind-powered plants in Washington, and part of the coal-powered Colstrip plant in Montana.
“The rule looks like it’s setting the utilities up to think in that way,” Ruchi Sadhir, senior policy advisor at the Public Utility Commission of Oregon, told ThinkProgress of trading-ready elements.
Increasingly, utilities like PSE and PGE are under political pressure to transition away from their investments in fossil fuels, like the Colstrip power plant, without compromising the energy security of their costumers. That’s something that regional trading-ready elements might be able to help with, according to Brad Cebulko, a regulatory analyst at the Washington Utilities and Transportation Commission.
“The West Coast states receive a significant amount of their energy from plants located outside their borders, particularly from Montana and Wyoming,” Cebulko told ThinkProgress. “Regional mechanisms would allow the state to achieve political goals, and work with the other counter party states to shut [the Colstrip] plant down.” Cebulko explained that Montana and Wyoming also have huge potential for generating power through renewable resources, especially wind. What they lack, he said, are population centers to capitalize on that generation.
For Oregon — whose residents pay energy rates dependent on resources that come from Montana, Utah, and Wyoming — there’s an incentive to make sure that those states are complying with the EPA’s regulations in a way that is cost-effective for Oregonians, Sadhir said.
“We have an incentive to see lower-cost compliance in those states,” Sadhir said. “That would imply discussion with them about potential trading regimes.”
Cebulko agrees that the absence of a formal agreement doesn’t mean that Western states won’t be looking to their neighbors to see how they’re crafting their state plans — and how individual state plans might be able to fit together more cohesively.
“I think it would make sense for neighboring states and regions to have collaborative discussions to discuss what is best for the states and regions and see if those align,” Cebulko said. “I imagine Washington state will be talking to their neighbors about what they are doing, because that’s exactly what we’ve been doing this whole time.”
It is not out of the realm of possibility for other western states to look into joining California’s cap-and-trade system, as the Canadian provinces of Quebec and Ontario have.
The Pacific states in particular have been working together on climate policy issues — formally and informally — for years. The Pacific Coast Collaborative began in 2008 as a way for California, Washington, Oregon, and British Columbia to exchange knowledge and wisdom about climate policy issues, from electric vehicles to ocean acidification, while working toward putting a price on carbon that could work on a regional scale.
So far, efforts to put a price on carbon have failed in Washington and Oregon due, in large part, to legislative infighting. The week before the release of the final Clean Power Plan, Washington Gov. Jay Inslee announced that he would circumvent the state legislature to put a cap on carbon, using the state’s Department of Ecology instead. But Jessie Turner, a project coordinator working on the PCC with the Seattle-based Cascadia Law Group, told ThinkProgress that the Clean Power Plan could incentivize the creation of the kind of regional markets that have been thwarted by legislative battles, by encouraging legislators to create a solution to the CPP that bolsters state and regional economies through a market-based solution.
“It’s the stick and the carrot, where before it might have just been the stick,” she said. “All the momentum behind these regional collaboratives in the last couple years has been dependent on legislative infighting. What this does, in my mind, is give state legislators the ability of being the hero, of fixing the problem, rather than imposing this ‘awful’ program on residents.”