Seven Northeastern states -- but not Massachusetts -- are about to embark on a historic effort to curb climate change by putting a limit on the carbon dioxide emissions of their electric power generators. They are doing so with one of the most ingenious applications of free market ideology of the last century: the cap and trade system introduced under the first President Bush to reduce the smokestack pollutants that cause acid rain.
On Thursday the seven states decided to proceed with this plan, which stands to reduce greenhouse gas emissions from their power plants by 10 percent by 2020. In the absence of action from President Bush or Congress, this initiative and California's leadership in requiring tough restrictions on carbon dioxide in auto exhaust will at least partially end this nation's disgraceful resistance to the international campaign to reduce global warming.
Governor Romney has so far not signed on because he worries that the agreement could inflate utility rates. Under the plan, a cap is put on all the emissions the industry can produce, and individual firms can buy and sell among themselves allowances to emit more than each is permitted. A firm that improves its efficiency or switches to renewable energy could sell its allowances to a firm that insists on burning more coal or oil. Romney would like to see a lid placed on the value of the allowances.
Officials in the other states don't want a lid, which they see as a restraint on the market's ability to drive real improvements in power generation. They also point to flexibility mechanisms that would keep the cost of allowances from spiking. Power companies can get credits by investing in carbon reduction projects outside of the industry, such as local tree-planting or capturing carbon emissions from landfills. Finally, if the cost of allowances were excessive, a governor could pull his state out of the agreement. A recent study by Romney's own Division of Energy Resources says that, far from causing a rise in rates, the initiative could lower them if some of the proceeds from allowance sales are invested in conservation and renewables.
Since mid-2003, Massachusetts has led in forging this agreement. By opting out now, Romney runs the risk of drawing a line between himself and Republican leaders like Senators John McCain of Arizona and Chuck Hagel of Nebraska and Governors George Pataki of New York and Arnold Schwarzenegger of California, all of whom favor bold action on climate change. He also jeopardizes the opportunity for Massachusetts firms to become global pioneers in the technology of carbon reduction, a point he made himself just a month ago, before he began getting cold feet on the plan. He was right then and is wrong now to make Massachusetts the odd state out.