U.S. States & Regions
States and regions across the country are adopting climate policies, including the development of regional greenhouse gas reduction markets, the creation of state and local climate action and adaptation plans, and increasing renewable energy generation. Read More
Market Mechanisms for Greenhouse Gas Emissions Reductions: Lessons for California
Prepared by the Pew Center on Global Climate Change
California is currently considering legislation that would establish state-wide caps on greenhouse gas emissions. This paper is based on extensive research by the Pew Center and others on the use of market mechanisms to reduce greenhouse gas emissions. It begins with a summary of possible solutions for the state, and then provides more detailed background on market mechanisms, with particular attention to relevant lessons for California.
On July 31, 2006, California Governor Schwarzenegger and British Prime Minister Tony Blair signed an agreement to act collaboratively to address climate change. The agreement commits both California and the United Kingdom to: enhance linkages between their respective scientific communities to assess the impacts of climate change at the regional level; share information on the economic impacts of climate change and of potential mitigation strategies and adaptation measures; collaborate on technology research, especially for the energy sector; evaluate and implement market-based mechanisms and explore the potential for linkages between such mechanisms in California and the UK. Blair and Schwarzenegger announced the agreement at a meeting with prominent Californian and European business leaders on climate issues.
On July 25, 2006, Connecticut Governor Jodi Rell signed “An Act Concerning Clean Cars” into law. This legislation, which goes into effect in October 2007, requires automobile manufacturers to affix a label to vehicles sold in the state detailing the vehicle’s greenhouse gas (GHG) emissions. The law bars both the sale and the lease of 2009 or later models without the required GHG label. The labeling program will be funded through a $5 fee on new car registrations. The new law also requires Connecticut’s Department of Environmental Protection and Department of Motor Vehicles to create an education program to disseminate information about global warming and the effect of vehicle choice on GHG emissions.
On July 7, 2006, Michigan Governor Jennifer Granholm signed into law legislation creating incentives for the production, distribution, and purchase of alternative fuels. The seven-bill package lowers the state tax on each gallon of ethanol-blended fuel from 19 cents to 12 cents and on biodiesel fuels from 15 cents per gallon to 12. The legislation also allows for the creation of new agriculture renaissance zones (i.e. regions of the state set aside as virtually tax-free) for companies producing ethanol and biodiesel and it provides grants to renovate or expand existing service stations to make E-85 and biodiesel available.
On July 5, 2006, Missouri Governor Matt Blunt signed House Bill 1270, creating the Missouri Renewable Fuel Standard Act. The bill requires all but premium grade gasoline sold in Missouri to contain 10 percent ethanol by the beginning of 2008. The bill also ensures consumers the lowest-price fuel by lifting the 10 percent standard during periods when ethanol is more expensive than petroleum. Officials anticipate that Missouri’s expanding number of ethanol production facilities, growing from three to four in the near future, will be quite capable of meeting this standard.
On June 29, 2006, Rhode Island Governor Donald Carcieri signed a comprehensive energy bill designed to encourage the use of energy efficiency, renewable and distributed energy systems (small power systems owned by the customer and connected to the grid). The legislation requires the state’s Public Utilities Commission (PUC) to set new standards for procuring energy from diverse sources, including renewable energy systems and distributed energy systems. By 2008, each utility in the state has to submit plans – to be updated every three years - for procuring these energy resources, including goals and target percentages for each resource. The energy bill also establishes new criteria to facilitate the siting of wind power facilities, creates a $7 million fund to support investments in renewable energy, and increases the rebates to consumers who purchase energy efficiency equipment. To help establish long-term energy plans, the legislation creates the Office of Energy Resources. Governor Carcieri also signed S 2844 on June 23rd, requiring the PUC to establish new energy efficiency standards for seven residential appliances by June 2007.
On June 26, 2006, Hawaii Governor Linda Lingle signed into law SB 2957 to encourage renewable energy and renewable fuels. This law raises the income tax credit for certain renewable energy technologies, makes this tax credit permanent, and establishes a pilot financing mechanism for the purchase of residential solar hot water heater systems. SB 2957 also provides incentives to support the production of biodiesel and cellulosic ethanol. Additionally, the legislation establishes the Hawaii Renewable Hydrogen Program to move the state toward a renewable hydrogen economy. SB 2957 is part of the governor's "Energy for Tomorrow" package, which includes three other new energy laws HB 2175 appropriates $5 million for solar power systems in public schools and instructs state agencies to maximize energy efficiency. This bill also encourages new green buildings by giving them priority when they apply for construction permits and sets green building standards for state buildings. Additionally, this legislation requires 20 percent of the state's new vehicles to be hybrids or alternative fuel vehicles, with the percentage increasing in subsequent years. SB 3185 establishes a public benefits fund for energy efficiency programs and authorizes the state's Public Utility Commission (PUC) to set penalties for failing to meet the state Renewable Portfolio Standard (RPS). Finally, HB 2848 appropriates $200,000 to reconvene the Hawaii Energy Policy Forum to develop an action plan, timeline, recommendations, and benchmarks to meet the state's energy self-sufficiency goals.
On June 15, 2006, Florida Governor Jeb Bush signed into law the Florida Renewable Energy Technologies and Energy Efficiency Act to reduce Florida’s dependence on foreign oil, spur economic growth, and increase investments in renewable energy sources and energy efficiency. The Act creates the Florida Energy Commission to advise the Legislature on state energy policy based on the principles of energy reliability, affordability, efficiency, and diversity. The first report by the Commission, due before December 2007, will include recommended steps and a schedule for the development of a state climate action plan through a public-involvement process to reduce GHG emissions. Additionally, the Act provides rebates for photovoltaic and solar thermal technology installations on commercial and energy buildings and a sales tax exemption for the purchase of energy efficient products. This legislation also provides grants for research and demonstration projects associated with the development of renewable energy technologies and alternative fuels.
On June 15, 2006, California Energy Commissioner Jim Boyd and Sweden's Minister for the Environment signed an agreement for the joint development of biogas and other alternative fuels. The agreement aims at fostering an extensive exchange of technologies and ideas between California and Sweden to advance the use of renewable fuels. Sweden currently has the largest fleet of biogas-fueled vehicles in the world. This would allow California to take advantage of Sweden’s expertise in the production of biogas, while giving the Swedish biogas industry a better opportunity to market its technologies and products in California.
On June 14, 2006, Oregon Governor Kulongosky appointed a “Climate Change Integration Group.” The Governor has charged this new group with tracking the State’s progress on greenhouse gas emission reductions and examining the future economic implications of climate change for the state. The Climate Change Integration Group will continue the work of the 2004 Governor’s Advisory Group on Global Warming, which developed strategies for reducing greenhouse gas emissions as part of a West Coast Governors’ Global Warming Initiative. Some of the policies and measures recommended by the earlier group were endorsed by the Governor. Part of the new group’s responsibilities will be to track the progress of those efforts. The Climate Change Integration Group will also explore new opportunities for research on the mitigation of, and adaptation to, climate change in Oregon and the Pacific Northwest.