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Massachusetts First State to Limit CO2 Emissions
Leading The Way: Massachusetts Issues Greenhouse Gas Offset Banking Rules for Power Plants Subject to The First (and only) State Limits on CO2 Emissions
 Massachusetts on October 6 becomes the first state in the country to adopt a greenhouse gas (GHG) offset banking system for credits used to comply with strict emission limits in place on carbon dioxide (CO2) at the state's six oldest power plants, heralding a new era in the battle to reduce GHG, linked by scientists to global warming.
While several other states have talked about it - or appear headed in a similar direction - Massachusetts is the first to officially enact regulatory CO2 emission reductions, while providing safeguards to avoid costs to consumers in the unlikely event that energy costs rise to extraordinarily high levels.
"This regulation provides real and vital environmental benefits, with a flexibility that is essential in this new and volatile energy market," Gov. Mitt Romney said. "It offers rate-hike protection for consumers and businesses, and perfectly complements my energy plan, which supports efficiency, conservation, and diversifying and increasing the energy supply through the use of renewable wood, hydro and wind power developments."
Regulations that provided the framework were initially established in 2001, but with the details of that goal - of limiting CO2 emissions from the six oldest and largest power plants in the state - to be worked out in future years.
On-site or Off-site Reductions Required of Power Plants
The rules that emerged following public hearings and extensive debate include flexible criteria by which the power plants can use projects - conducted on or off their sites - that reduce, avoid or sequester GHG emissions to meet their compliance obligations. These projects may be conducted by the facilities themselves or by third parties.
Power-generation companies can implement GHG reductions at their own facilities or fund other reduction projects off-site through a GHG credit program. In other words, to stay within the limits, power plants could reduce emissions on-site, or purchase these emission credits from third parties that have "banked" emissions reductions certified by MassDEP. Those third-party projects could include the capture of combusted landfill gases, sequestration of GHG, or the generation of renewable energy, among others.
The end result is that greenhouse gases will decrease and it is expected that, when fully implemented, these regulations will result in the annual reduction of about 2 million tons of CO2, or 10 percent below levels emitted in the late 1990s. The CO2 and GHG regulations, when combined with the Governor's long-term energy plan, will produce a reduction of 3-6 million tons of GHG per year.
Consumers Protected from Electricity Price Spikes
Because the market for GHG credits is just beginning, the regulation contains protections against unexpected and excessive price increases. Initially, facilities can conduct offset projects or purchase offsets from projects conducted in the northeastern US, which keeps environmental benefits and technological developments closer to Massachusetts. However, if the price of available offsets reaches a calendar year average of $6.50 per ton of GHG emissions, companies would then be able to shop for offsets anywhere in the world, where cheaper opportunities might be available - thus protecting ratepayers while providing the same environmental benefits.
In the unlikely event that the price of offsets climbs to $10 per ton, power plants can then meet their emissions obligation by paying into a Greenhouse Gas Expendable Trust. The Trust will be used by the state to fund projects achieving the maximum amount of GHG reduction at the lowest price, with a preference for Massachusetts-based reductions.
As a further protection, the final regulations include a Circuit Breaker provision in the first three years of the program, which allows the Commissioner of the Massachusetts Department of Environmental Protection (MassDEP) to expand the geographic scope of projects or allow payments into the GHG Expendable Trust, if credits are unavailable or prices rise unexpectedly. The circuit breaker sunsets on January 1, 2009, after which it is expected that the GHG emission credit market will be more firmly established.
Offset projects must demonstrate a reduction in GHG of at least 5,000 tons per year and can be submitted by any company for credit. The applicant, however, must demonstrate that offsets can be certified by MassDEP. To view more information on the GHG regulations and the response-to-comments document, click on the following MassDEP Website at: http://mass.gov/dep/air/laws/regulati.htm#ghg
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