Green Wombat

The governors of Arizona, California, New Mexico, Oregon and Washington today signed a climate initiative designed to create a western regional carbon trading market to reduce greenhouse gases. "This … sets the stage for a regional cap and trade program, which will provide a powerful framework for developing a national cap and trade program,” said California Governor Arnold Schwarzenegger in a statement.  “This agreement shows the power of states to lead our nation addressing climate change.” The five-state accord, known as the Western Regional Climate Action Initiative, calls for the participants to develop over the next 18 months a regional target for cutting greenhouse gases and to create a regional emissions inventory. The accord in effect extends California’s landmark global warming law to neighboring states, establishing a western counterpart to nine northeastern states’ Regional Greenhouse Gas Initiative. The creation of two large carbon trading blocs will undoubtedly put further pressure on Congress to pass a national cap-and-trade legislation.

But drafting a western regional emissions cap won’t be easy, given the states’ varying dependence on coal-fired power. Arizona and New Mexico generate coal-fired electricity while the three coastal states rely largely on natural gas and hydro for their power.  California in January banned its investor-owned utilities – PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) – from signing long-term contracts to buy electricity from out-of-state coal-fired plants. The regional accord will also put new pressure on coal plants in two border states not part of the deal – Nevada and Utah. The announcement of the accord comes as Texas utility TXU (TXU) agreed to a $45 billion takeover by private equity firms that will result in the abandonment of 8 of 11 planned coal-fired power plants for the Lone Star State. TXU also will forego plans for coal-fired plants in other states.

In a speech at the National Governors Association meeting in Washington, D.C., Schwarzenegger urged other states to adopt California’s low carbon fuel standard, which requires that transportation fuel sold in the Golden State must be 10 percent less carbon intensive by 2020.