When the Obama Administration announced that it would be ordering the U.S. Environmental Protection Agency (EPA) to enact new regulations on emissions from coal-fired plants, many environmentalists hailed the move as a significant step toward mitigating climate change. As this blog wrote at the time, the new regulations are expected to initiate a move toward a national cap-and-trade system, under which utilities would have to purchase and trade permits for the amount of carbon dioxide they emit. By 2030, power plants will be required to cut emissions by 30 percent when compared to 2005 levels.
Many coal utilities are undoubtedly concerned about what this will mean for their business. However, those who want a better understanding of what they might face need look no further than California.
Back in 2006, California approved a climate change law that was even stricter than what has just been proposed on the federal level. The market for carbon that the state created rewarded those firms that were able to reduce their emissions by a certain level and punished those that did not. It also laid the groundwork for more innovative partnerships, such as a proposal by California to work with nearby states and the Canadian province of British Columbia.
The EPA's proposal would not require much of California, but it would bring other states up to roughly the same level. Many California officials believe that this will lower the cost of energy overall, due to the growing size of the market. But before utilities in other states begin to adjust, they should meet with an environmental consultant that can walk them through the process and ensure they are able to maintain compliance going forward.