Climate Change: Action by States to Address Greenhouse Gas Emissions
Released: 2008-12-04T00:00:00

Introduction

Over the past century, particularly in recent decades, scientists have documented increases in global temperature and sea levels, decreases of sea ice in the Arctic, and melting of continental ice sheets and mountain glaciers. There is increasing evidence that human activities are at least partially responsible for some of these effects. This is based upon the combination of two conclusions. First, global temperature increases are linked in some manner to the measurable increases of greenhouse gas (GHG) concentrations in the atmosphere. Second, human activities (e.g., fossil fuel combustion, industrial processes, and deforestation) have contributed to the increased concentration of GHG emissions in the earth's atmosphere.

The link between GHG emissions and climate change has motivated efforts to achieve reductions of emissions. In 1992, the United States ratified the United Nations' Framework Convention on Climate Change (UNFCCC), which called on industrialized countries to initiate GHG reduction. However, in early 2001, President George W. Bush rejected the UNFCCC 1997 Kyoto Protocol, which called for legally binding commitments by developed countries to reduce their GHG emissions.

Over the past decade, the federal government has promulgated or proposed a variety of voluntary and regulatory actions that, while not specifically seeking to reduce GHG emissions, may have yielded emission reductions as a byproduct. In the 110 th Congress, Members introduced multiple bills to address climate change issues in some fashion and enacted several pieces of legislation that contained climate change provisions.

In recent years, there has been some congressional support for a mandatory reduction program. For example, the Senate version of the Energy Policy Act of 2005 included a "sense of the Senate" Resolution stating:

It is the sense of the Senate that Congress should enact a comprehensive and effective national program of mandatory, market-based limits and incentives on emissions of greenhouse gases that slow, stop, and reverse the growth of such emissions at a rate and in a manner that, No. 1, will not significantly harm the U.S. economy and, No. 2, will encourage other action and key contributors to global emissions.

Members in the 110 th Congress introduced multiple bills that would have established some type of a mandatory emissions reductions program. One of these proposals—the Lieberman-Warner Climate Security Act of 2008 ( S. 2191 / S. 3036 )—was reported by the Senate Environment and Public Works Committee (December 2007) and debated in the Senate in June 2008.

In the absence of action by the federal government to establish a national program that directly addresses GHG emissions, a number of states (and local governments, whose activities are not covered in this report ) have taken action in this arena.

States' efforts cover a wide spectrum, from developing climate action plans to setting mandatory GHG emission standards. Arguably, early state actions were largely symbolic. In the late 1980s, Vermont and Oregon were the first states to set GHG reductions goals, but during the subsequent decade (1990-2001), both states increased their GHG emissions: Vermont by 18% and Oregon by 30%. However, a majority of states have more recently begun to develop their own climate change strategies or policies, with an increasing number of states adopting or proposing more significant provisions, including mandatory GHG reductions.

The motivating factors for the various states' actions may be as diverse as the actions themselves. Some actions are motivated by projections of climatic changes, such as sea level rise or agricultural impacts. Some states view their GHG policies as economic opportunities. States want to position themselves for a "less-carbonized" future, by promoting, for example, alternative energy supplies, particularly sources available in-state. Other states champion GHG reduction policies because of the possible co-benefits: improved air quality, reduced traffic congestion, and less reliance on foreign energy supplies. Another motivating factor for state action is the possibility of catalyzing federal legislation.

This report covers state actions that directly and explicitly address GHG emissions (see the text box below). First, the report describes the different types of state actions, both individual and cooperative efforts, that are either proposed or under way, and highlights several of the more significant developments. Second, the report examines state actions from a federal policymaking perspective, including both the potential effects of state-led actions and their limitations.

Mandatory Programs to Reduce Greenhouse Gases

Mandatory programs to require GHG reductions represent the most aggressive end of the state action spectrum. As with state actions overall, these programs can vary significantly in scope, stringency, and design. Mandatory programs are generating considerable interest and some controversy. This section discusses the different types of mandatory programs and highlights the regional initiatives and individual state actions that are currently in effect or under development.

Regional Activities

Arguably, the most significant action on the state level in recent years has involved the development of regional agreements to address GHG emissions. As of the date of this report, 23 states have joined—more states are acting as observers—one of the 3 regional partnerships that would require GHG (or only CO 2 ) emission reductions ( Figure 1 ). Except for the partnership between 10 northeastern states, the regional activities are still in their developmental phases. Moreover, the western and midwestern regional partnerships were initiated by state governors and may not be approved and/or implemented by the relevant state legislatures.

In addition, the regional agreements may raise legal issues, particularly constitutional concerns. Article I, Section 10, Clause 3 of the U.S. Constitution states that "[n]o State shall, without the Consent of Congress ... enter into any Agreement or Compact with another State, or with a foreign Power.... " In particular, two of the regional agreements include Canadian provinces. However, it is uncertain whether this clause (the "compact clause") will create legal hurdles for any of the agreements.

Regional Greenhouse Gas Initiative

One of the more significant climate change developments at the state level is the Regional Greenhouse Gas Initiative (RGGI, pronounced "Reggie"). RGGI has been under development since 2003, when states from the Northeast and Mid-Atlantic regions began to discuss setting up a cooperative effort to reduce carbon dioxide emissions. Subsequent meetings and workshops culminated in a Memorandum of Understanding (MOU) that was signed in December 2005. RGGI is a market-based effort by 10 states—Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont—to reduce carbon dioxide emissions from power plants. RGGI would set up the nation's first mandatory cap-and-trade program for carbon dioxide.

The initial objective of RGGI is to stabilize current carbon dioxide emissions from power plants in RGGI states, starting in January 2009, followed by a 10% reduction by 2019. A primary strategy of RGGI is to create a program with flexibility, so that in the future other emission sources/sectors, GHGs, or states could be included.

Some observers consider RGGI to be a possible test-case for a federal cap-and-trade program, and thus several of RGGI's design elements are generating interest and debate. For example, one specific feature—the emission allocation scheme—is drawing both praise and criticism. In both RGGI's Memorandum of Understanding and its Model Rule, states agreed that at least 25% of emission allowances will be allocated for a "consumer benefit or strategic energy purpose." Since then, all of the states have indicated—either through legislation or rulemakings—that they intend to allocate more than 25% of their state's emissions allowances for various purposes related to those two overarching objectives.

This allocation strategy requires power plants to purchase the allowances through an auction, instead of receiving them at no charge. On September 25, 2008, RGGI participants held the first emission allowance auction related to climate change mitigation. Six RGGI states—Connecticut, Maine, Maryland, Massachusetts, Rhode Island, and Vermont—sold allowances for the first RGGI compliance period (2009-2011). By many accounts, the auction was successful: the clearing price as $3.07/ton (60% higher than the reserve price); compliance entities received about 80% of the allowances; and states received nearly $40 million in revenues.

Although RGGI is one of the more aggressive state programs addressing climate change, the program has received some criticism and may face upcoming challenges. For example, recent emissions data indicate that the RGGI cap—188 million short tons of carbon dioxide—will most likely be higher than actual emissions, when RGGI goes into effect in 2009. The cap was set slightly above (about 4%) the average emission levels observed between 2000 and 2002. RGGI designers anticipated that emissions would gradually increase, so that actual levels would approximately match the cap in 2009. Although emissions increased in 2007 from their relatively dramatic decline of 2006, emissions data from the first half of 2008 are similar to 2006 figures, suggesting that 2008 emission are unlikely to increase further; another estimate projects that 2008 emissions may go as low as 150 mtCO 2 , approximately 20% below the 2009 cap.

If actual emissions are below the cap when it goes into effect, the effectiveness of the RGGI program may be impacted. The allowance price might drop to such a low level that facilities would have no financial incentive to make reductions beyond their required allocation. This potential problem may be alleviated by the opportunity for affected sources to bank emission reductions for future use, when the cap will likely be lower than expected emissions. The RGGI program allows unlimited banking. The ability to bank reductions effectively spreads the costs of emission reduction over time. Banking emissions would reduce compliance costs in the future, but also increase the value of current allowances (because they can be sold later). The incentive to make additional reductions would remain. The recent auction sales data support this notion, as the clearing price was above the reserve price.

In addition to allocation concerns, a critical design detail—electricity imports from non-RGGI states—is arguably unresolved. This is often described as the "leakage" problem. Leakage can occur when an emissions reduction program does not include all sources contributing to the environmental problem. For example, if a RGGI state lowers its emissions by importing more power from a non-RGGI state, the emissions reductions in the RGGI state may be offset by an emission increase in the exporting state. A RGGI working group issued a final report on leakage March 2008. Among the four recommendations, the working group concluded that states should monitor for emissions leakage and evaluate whether more aggressive measures—e.g., carbon adders, procurement emissions rates, or load-based caps—should be considered at a later date.

Western Climate Initiative

Seven U.S. states and four Canadian provinces are participating in the Western Climate Initiative (WCI). WCI got off the ground in February 2007, when the governors of six western states —Arizona, California, Oregon, New Mexico, Utah, and Washington—agreed to reduce GHG emissions in their region. Montana and the four Canadian provinces—British Columbia, Manitoba, Quebec, and Ontario—joined at later dates. The states and provinces set a regional, economy-wide target to reduce GHG emissions to15% below 2005 levels by 2020. In order to implement this target, the participants agreed to develop a market-based program, such as a "load-based cap and trade program."

In September 2008, the WCI developers issued design recommendations for meeting the emission reduction goals. The recommendations include a cap-and-trade system that would cover emissions from electricity generation and large industrial and commercial sources in 2012. In 2015, the program would cover emissions from the transportation sector and fuel consumption from residential, commercial, and industrial uses not otherwise covered. The recommendations also include flexible design elements, such as unlimited emission banking, three-year compliance periods, and offsets, which may satisfy up to 49% of the emission reductions. Although this number may appear relatively high compared to federal cap-and-trade proposals, limiting offsets by percentage of reductions is different from limiting offsets as a percentage of allowance submissions (as many federal proposals would do). As a comparison that may provide additional context, RGGI participants agreed to a similar principle: at least half of the reductions should come from covered sources, thus allowing offsets to cover up to 50% of reductions. To apply this principle, RGGI designers allow offsets to satisfy up to 3.3% of a compliance submission. In contrast, most federal proposals would allow domestic offsets to satisfy at least 15% (international offsets often add a further percentage) of a covered sources allowance submission.

Although the WCI is still in early development, there are several issues that may hinder its implementation. As noted, the WCI is an agreement between the states' governors. To implement the program, the states' legislatures would need to enact laws to carry out the initiative's objectives. This may present an obstacle if a state's legislative branch finds fault with the reduction program developed by states' executive branch officials.

Midwestern Regional Greenhouse Gas Reduction Accord

On November 15, 2007, the governors of six states—Illinois, Iowa, Kansas, Michigan, Minnesota, and Wisconsin—signed the Midwestern Regional Greenhouse Gas Reduction Accord. The Premier of the Canadian Province of Manitoba also signed the Accord, potentially raising the same legal issues discussed above.

The Accord does not establish discrete GHG emissions targets, but directs the participating states (and their relevant state agencies) to set their own GHG emission reduction targets. In order to meet these GHG emission targets, the Accord calls for the participants to develop a cap-and-trade program and a model rule by November 2008. Although draft recommendations were made available November 2008, the time line was amended by the participants: a draft model rule is now scheduled for September 2009.

The participants agreed that full implementation of the Accord will be completed by May 2010. Although not full participants in the Accord, the Governors of Indiana, Ohio, and South Dakota signed on as observers, agreeing to participate in the formation of the regional cap-and-trade system.

Individual State Efforts Requiring GHG Reductions

Individual state efforts that seek to reduce GHG emissions cover a range of activities. Outside of regional agreements, several states currently require power plants to make GHG emission reductions or submit offsets. Other states are developing "economy-wide" GHG emission reduction programs. Multiple states are planning to adopt California's motor vehicle standards for GHG emissions. In addition, states are working on other mechanisms that would require GHG emission reductions. These state efforts are discussed below.

Economy-Wide Reduction Initiatives

Three states—California, Hawaii, and New Jersey—have passed legislation that lays the groundwork for "economy-wide" reduction programs. In general, the state statutes lack critical details regarding the design of the reduction programs. Instead, the statutes direct state agencies to develop the logistical elements that would implement the reduction requirements. However, these programs vary substantially in their progress of development, the California program being well ahead of the other programs. These programs are described below.

California

In September 2006, California enacted landmark legislation—AB 32 or the Global Warming Solutions Act —that would establish a comprehensive GHG reduction regime. The legislation is far-reaching in principle, but does not include many crucial details. Instead, the act directs the California Air Resources Board (CARB) to develop and implement a statewide program that would reduce the state's GHG emissions to 1990 levels by 2020.

The statute grants considerable authority to CARB, which is charged with determining critical details concerning the framework and applicability of the program. For example, the law does not specifically require the use of a market-based system, such as a cap-and-trade program, to reduce GHG emissions. Instead, AB 32 authorizes CARB to develop regulations to "achieve the maximum technologically feasible and cost-effective GHG emission reductions.... " Moreover, the statute does not include a list of regulated emission sources or categories, but instructs CARB to determine which sources are necessary to meet the statewide target.

The statute does dictate a schedule for various agency deadlines. The following dates highlight significant milestones of the mandatory schedule:

June 30, 2007: Identify the early reduction options, which can be implemented prior to the mandatory program, and for which a facility will receive emissions credit. In October 2007, CARB submitted its final report of early actions, which are to be implemented via regulation and enforceable by January 1, 2010. January 1, 2008: Establish the 1990 baseline, which becomes the 2020 emissions cap. A baseline estimate is a critical determination for a cap-and-trade program. On December 7, 2007, CARB approved a baseline of 427 million metric tons of carbon dioxide equivalent (mmtCO 2 e). January 1, 2008: Develop a mandatory reporting scheme for sources that will covered by the cap. Sources report emissions for four years in order to establish accurate facility baselines. CARB submitted regulations for approval to the Office of Administrative Law in October 2008. The regulations would require the first emissions reports to be submitted in 2009 based on 2008 emission levels. January 1, 2011: Finalize regulations, including possible market-based programs, that will implement the statewide emissions cap. Related to these efforts, the Scoping Plan was prepared in October 2008 and awaits approval from CARB. January 1, 2012: Implement and enforce the mandatory emission reduction program created in 2011.

Hawaii

In June 2007, Hawaii enacted the Global Warming Solutions Act of 2007, mandating statewide GHG emissions reduction to 1990 levels by 2020. The statute establishes a GHG emissions reduction task force, which is directed to offer policy recommendations by January 1, 2009. Before December 31, 2011, the Department of Health is instructed to adopt implementing regulations that would take effect January 1, 2012. Similar to California's statute, Hawaii's act does not specify details, but gives considerable responsibility to the Department of Health. The act does require the Department of Health "to endeavor to make the requirements consistent with the requirements of international, federal, and other states' greenhouse gas emission reporting programs, as necessary."

New Jersey

In July 2007, New Jersey enacted the Global Warming Response Act, which states that GHG emissions shall be reduced to 1990 levels by 2020 and to 80% below 2006 levels by 2050. The statute instructs the Department of Environmental Protection (DEP) to develop a GHG emissions inventory for the baseline years—1990 and 2006—and a system for monitoring and reporting GHG emissions from specific sources (e.g., electricity generators), as well as entities deemed to be significant emitters by the DEP. The law does not specify how the reductions will be met, but directs the DEP, in coordination with other agencies, to submit recommendations to the governor and state legislature. In response to this provision, the DEP prepared a report November 2008. However, unlike the California and Hawaii statutes, the New Jersey act does not grant specific authority to DEP to implement the reduction program through regulation. Although not specifically stated, further legislative action would likely be required to implement the reduction program.

Emission Reduction from Power Plants

A sector-specific approach that focuses on carbon dioxide is relatively easier to implement than an economy-wide program that includes multiple GHGs. The electricity-generating sector is often considered a primary candidate for emission reduction, because in most states electric power plants account for the highest percentage of carbon dioxide emissions. Many of these facilities are already tracking their carbon dioxide emissions as required by the 1990 Clean Air Act.

Oregon and Washington

Both Oregon and Washington have programs that require new power plants to reduce carbon dioxide emissions or purchase offsets. In 1997, Oregon became the first state to regulate carbon dioxide emissions by passing legislation requiring new power plants to equal or exceed carbon dioxide levels that are 17% below the best natural gas-fired plant in the nation. Plants can either reduce emissions directly or purchase offsets from a nonprofit organization (the Oregon Climate Trust) that was established with the 1997 law. This organization helps develop various projects that will reduce or sequester GHG emissions. These projects generate the pool of offsets available (by purchase) to the power plants. So far, all of the new facilities have chosen to purchase offsets instead of reducing onsite emissions. Washington passed similar legislation in 2004, requiring new power plants to offset 20% of their carbon dioxide emissions.

Massachusetts and New Hampshire

These states have established emission reduction requirements at existing power plants:

Massachusetts: In 2001, Massachusetts became the first state to take formal action on carbon dioxide emissions at operational power plants. As part of a multi-pollutant strategy, which went into effect in 2006, the state's six largest power plants must reduce carbon dioxide to levels consistent with those produced in the late 1990s. In 2008, this cap was lowered further. The program allows the plants to either make the reductions, demonstrate offsite reductions, or purchase emissions credits from other verifiable sources. Note that the carbon dioxide components of this program will be superceded when RGGI goes online in 2009. RGGI will require reductions from 32 power plants in the state. New Hampshire: In 2002, the state enacted multi-pollutant legislation requiring its three fossil fuel power plants to reduce carbon dioxide to 1990 levels by the end of 2006. In order the meet the cap, the law allowed sources to bank early reductions or buy credits through other programs deemed acceptable by state officials. The carbon dioxide elements of this program also will be superceded by RGGI.

Florida

In June 2008, Florida enacted legislation that authorizes the Florida Department of Environmental Protection to craft a cap-and-trade system that would cover the electric utility sector. Pending subsequent approval by the state legislature, the cap-and-trade program would go into effect in 2010.

Emission Reduction from Motor Vehicles

The U.S. transportation sector accounts for a substantial percentage—26% in 2006 —of the nation's GHG emissions. Automobiles and light-duty trucks (fueled by gasoline or diesel) generate the majority—62% in 2006—of the nation's transportation-related GHG emissions. The transportation sector is the single largest source of the primary GHG, carbon dioxide, in 17 states.

California's transportation sector, in particular, generates almost 41% of the state's annual greenhouse emissions. California is in a unique position regarding the regulation of air emissions from motor vehicles. It is the only state with conditional authority (i.e., the state needs a waiver from EPA) to develop motor vehicle pollution standards that are more stringent than federal requirements. The federal Clean Air Act permits other states to choose to follow California's more stringent provisions, and states have adopted California standards in the past.

In 2002, California enacted the first state law (AB 1493) requiring GHG limits from motor vehicles. As directed by the statute, the California Air Resources Board (CARB) issued regulations in September 2004, limiting the "fleet average GHG exhaust mass emission values from passenger cars, light-duty trucks, and medium-duty passenger vehicles." The fleet average caps first apply to model year 2009 vehicles. The caps become more stringent annually, so that by 2016, the fleet average would be 30% below the 2009 level.

At least 16 states have formally adopted or announced plans to follow the California regulation. In order for the states to implement this standard, California must receive a waiver from the EPA. California requested a waiver (as required by Section 209 of the Clean Air Act) in December 2005. In December 2007, EPA decided to deny the waiver request. EPA's decision is being challenged in court—by California and other states, and environmental groups. For more discussion regarding this issue, see CRS Report RL34099, California ' s Waiver Request to Control Greenhouse Gases Under the Clean Air Act , by [author name scrubbed] and [author name scrubbed].

Other Mandatory Programs

Although they do not require emission reductions or offsets from specific facilities or sources, other mandatory programs may have an impact on GHG emissions. A few states, California in particular, have recently developed requirements that aim to influence investment in long-term power generation. These state actions may impact GHG levels by influencing which energy sources—coal, oil, natural gas, etc.—are used to generate electricity for consumers.

Greenhouse Gas Emissions Performance Standard

Two states—California and Washington—have enacted laws requiring a GHG emissions performance standard for applicable power plants. In September 2006, California passed legislation (SB 1368) forbidding "load-serving entities" from entering into new "long-term financial commitments" with power plants unless a plant's GHG emissions are as low or lower than those of a new, combined-cycle natural gas facility. This emissions performance standard apply to both in-state power plants and out-of-state facilities that seek to export electricity to California. As directed by the statute, the California Public Utilities Commission (PUC) issued interim performance standards for investor-owned facilities January 25, 2007. The California Energy Commission's (CEC) comparable regulations for publicly owned utilities were approved (by the Office of Administrative Law) in October 2007.

Washington passed similar legislation (SB 6001) in May 2007. Regulations implementing this statute were adopted in June 2008, and went into effect the following month.

The new performance standards complement the emissions reductions programs being developed in California and Washington. As discussed above, California is developing a mandatory reduction program, and Washington has a statewide emissions reduction target; both states are participants in a regional emissions reduction program (WCI). The implementation of California's emissions reduction program and the WCI is several years away (irrespective of legal challenges). The performance standards act as a stop-gap measure, preventing further utility investment in carbon-intensive fuels while the states develop broader reduction regimes.

Once the new performance standards are applicable (and previous commitments expire), they will effectively prohibit California and Washington consumers from using electricity generated by conventional coal-fired power plants. Compared with a combined-cycle natural gas plant, a conventional coal-fired power plant emits more than twice the amount of carbon dioxide. Using current technologies, coal-fired generators would fail to meet the new emissions standards.

From 2002 through 2005, approximately 20% of California's electricity was generated from coal; approximately 10% of Washington's electricity came from coal generation facilities over the same period. As the laws take effect, California and Washington will likely need to reduce/conserve a comparable amount of energy or replace the coal-generated electricity with alternative sources of power.

The new emissions standards will impact not only California and Washington, but also other states in the West. For example, California's electricity imports generally comprise between 22% and 32% of the state's total electricity consumption, but its imports are responsible for 39% to 57% of the total GHG emissions linked with electricity. This is due to the fact that most of California's in-state electricity is produced from sources other than coal, while most of the state's imported electricity is generated through coal combustion. Once the standard takes effect, the coal-fired plants in neighboring states, which previously provided electricity to California, will need to look elsewhere for customers. The same goes for coal-fired power plants still in development in western states, which may have been designed, at least in part, to serve California consumers.

Arguably, the GHG performance standards disproportionately affect the neighboring states that have historically exported coal-generated electricity to California and Washington consumers. This possible consequence may raise legal issues, such as a state's general inability to regulate interstate commerce.

Montana's Carbon Capture and Sequestration Standard

Montana enacted the Electric Utility Industry Generation Reintegration Act (HB 25) in May 2007. Among other things, the act prohibits the state's Public Service Commission (PSC) from providing advance approval of coal-fired electric generating units unless a minimum of 50% of the CO 2 generated by the facility would be captured and sequestered. The PSC promulgated regulations to implement this standard in March 2008. At first glance, this statute may appear to be significant landmark in state climate change activity. However, the statute's applicability is relatively narrow, effectively applying to only one public utility—Northwestern Energy—in the state. Moreover, this utility does not own generating units in Montana and is unlikely to construct conventional coal-fired plants in the near future. Other power companies in the state are not subject to this standard.

Low Carbon Fuel Standard

To complement California's statewide GHG reduction program, the governor issued an executive order (signed January 18, 2007) establishing a low carbon fuel standard (LCFS). The LCFS aims to reduce the carbon intensity of California's transportation fuels by 10% by 2020. California currently relies on petroleum-based fuels for 96% of its transportation needs. Achieving the carbon intensity reduction is expected to replace 20% of the state's gasoline consumption with less carbon-intensive fuels. The LCFS would apply to all refiners, blenders, producers, and importers of transport fuels.

The order states that transportation fuels shall be measured on a full fuel cycle basis. Thus, regulators must factor in all of the energy used and potential GHGs emitted during the fuel's development (extraction or production), delivery (via vehicle or pipeline), and final use (combustion). Corn-based ethanol, for example, is expected to play a role in meeting California's LCFS. To comply with the full fuel cycle assessment, regulators must consider the energy needed to produce fertilizers, operate farm equipment, transport corn, convert corn to ethanol, and distribute the final product. For more information on these issues, see CRS Report RL33290, Fuel Ethanol: Background and Public Policy Issues , by [author name scrubbed].

The LCFS executive order enhances alternative fuel legislation (AB 1007) that California passed in 2005. AB 1007 requires the California Energy Commission (CEC), in partnership with other agencies, including CARB, to develop and adopt a State Alternative Fuels Plan. CEC adopted such a plan October 31, 2007. The executive order directs CEC to supplement this plan with a compliance schedule for meeting the 2020 LCFS target. The State Alternative Fuels Plan states that CEC will work with CARB "over the next year" to develop a compliance schedule. As of the date of this report, the compliance schedule remains under development.

Greenhouse Gas "Adders"

Another state action that may affect a state's sources of electricity generation is the adoption of a GHG (or carbon) adder. In general, adders require utilities to weigh the future costs of GHG emissions when considering different energy investment options (e.g., fossil fuels, renewable energy supplies). For example, California's Public Utilities Commission requires investor-owned utilities to include a value of $8/ton of carbon dioxide emissions when conducting long-term planning or procurement activities. The agency stated that this requirement "will serve to internalize the significant and under-recognized cost of [GHG] emissions, [and] help protect customers from the financial risk of future climate regulation.... " Only a few other states require some type of GHG adder, and California's adder may be rendered less relevant due to its new emission performance standard (discussed above). At this stage, the adders have not been credited with changing any procurement decisions.

Greenhouse Gas Emissions Targets

State emissions targets are goals by which a state can measure its progress in achieving GHG emissions reduction. By themselves, state emissions targets do not directly reduce GHG emissions. The targets are often established by the executive branch of state government (e.g., through an executive order) and may not have the support of the state's legislative branch. However, a target signals that state officials, at least from one branch of the government, consider climate change an important issue.

Twenty states have established statewide targets for GHG emissions (see Table 1 ). Three of the state targets—California, Hawaii, and New Jersey—are mandatory (discussed above). Compared to the GHG limits and targets set on the international stage in past years, the state targets are less stringent. The New England states' targets are similar, if not identical, because they are part of a cooperative plan developed in 2001. Of the 20 states in Table 1 , Colorado, Illinois, New Mexico, and Utah stand out because they have substantial coal production.

Table 1 compares the states' GHG emissions in 1990 with emissions from the most recent years of available data. The emissions data show the reductions states would need to make to meet their established targets. Although some of the states appear within reach of their 2010 targets, the most recent data from many of these states suggest that emissions are not decreasing, but at best are leveling off. In some states—e.g., Arizona and Florida—emissions have increased substantially in recent years. More years of data are needed to evaluate progress, primarily because many of the states issued their GHG targets after 2003. Moreover, the emissions targets were typically created in conjunction with GHG reduction policies—some of them mandatory limits on specific industries or segments of state activities—whose implementation may not be reflected in the available emissions data.

Greenhouse Gas Emissions Tracking

Reliable GHG emissions data are a keystone component of any climate change program. To implement effective solutions to climate change, policymakers need up-to-date and accurate information detailing the volume and sources of GHG emissions in their states. Precise monitoring is particularly vital for market-oriented approaches to GHG control. Whether a market-oriented program is based on tradeable emissions credits or a carbon tax, reliable and transparent emissions data would be the foundation for developing the allocation systems, reduction targets, and enforcement provisions.

Federal Tracking Programs

The federal government has several programs in place that either track or estimate GHG emissions:

Power plants subject to the 1990 Clean Air Act acid rain program must monitor and report to EPA various air pollutants, including carbon dioxide. The Department of Energy administers a voluntary GHG reduction registry. This program started in 1994, pursuant to Section 1605(b) of the Energy Policy Act of 1992 ( P.L. 102-486 ). The EPA prepares an annual inventory of the nation's GHG emissions and sinks, which is submitted to the United Nations in accordance with the Framework Convention on Climate Change.

State Emission Tracking Programs

Many states have developed, or begun to develop, their own GHG tracking programs. Although tracking programs may overlap in purpose and terminology, for this report, tracking programs are divided into three categories: mandatory reporting, registries, inventories.

Mandatory Greenhouse Gas Reporting

Mandatory reporting programs allow states to monitor GHG emissions from precise sources. Although the primary purpose of mandatory reporting is typically to support an emission reduction program, a reporting program can potentially provide benefits without an accompanying reduction requirement. For example, if companies' GHG emissions were made publicly-available and thus comparable, the companies might have an incentive to reduce emissions voluntarily. However, there is some concern that emissions may increase under a mandatory reporting program, especially if companies suspect that the state will establish a mandatory reduction regime in later years. For instance, facilities may attempt to "game" the system by deliberately increasing emissions (or over-reporting them) in order to gain additional allowances once a reduction program is established.

A few states already require, and others are in the process of developing, GHG emissions reporting to complement an emissions reduction program. Some states require reporting of GHG emissions that are not included in reduction programs. For example, some of the RGGI states mandate reporting of non-CO2 GHG emissions. In addition, other states currently have a mandatory reporting program that is not linked with an emissions reduction requirement. Both of these types of reporting activities are listed below, in the order of when the program started or is scheduled to start:

Wisconsin: In 1993, the state established a mandatory reporting program that includes carbon dioxide reporting for facilities generating over 100,000 tons annually. New Jersey: Certain facilities in New Jersey that report air pollutant emissions must also submit emission data for carbon dioxide and methane. This requirement went into effect in 2003. New Jersey is developing a mandatory reduction program (discussed above) that will entail a more comprehensive reporting regime. Maine: Facilities in Maine that emit any criteria pollutant over a specific reporting threshold must also report GHG emissions. This provision went into effect July 2004. Connecticut: Starting in 2006, facilities subject to federal reporting under Title V of the Clean Air Act must submit GHG emissions data on an annual basis. California: See the above discussion regarding the implementation of AB 32, which includes mandatory GHG emission reporting. North Carolina: Facilities with Title V permits (under the Clean Air Act) that submit annual air pollutant emission inventories to the state will be required to include GHG emissions in their 2009 submission (due June 30, 2009). New Mexico: Beginning in 2009, all electrical generating units of 25 megawatts capacity or higher, petroleum refineries, and cement manufacturing plants will be required to report GHG emissions. The initial report will only include CO 2 emissions; reporting of other GHGs will be required in later years. Oregon: In October 2008, the Oregon Environmental Quality Commission established a GHG emission reporting requirement for entities that emit more than 2,500 metric tons of CO 2 annually. Title V sources will report 2009 emissions in 2010; all other sources will report 2010 emissions in 2011. Washington: In March 2008, the state enacted H.B. 2815, directing the Department of Ecology (DEC) to develop a GHG emission reporting system. Starting in 2010, the statute requires emission reporting from entities that emit more than 10,000 t CO 2 annually and vehicle fleets emitting more than 2,500 tCO 2 e annually.

Greenhouse Gas Registries

In general, state GHG registries are voluntary programs that allow facilities to submit and officially record emissions data. The states' voluntary registry programs encourage participation through incentives. Perhaps the primary incentive is the opportunity for participants to create an official record of emissions reductions, which the parties hope will count as emissions credits in future mandatory reduction programs. At a minimum, participants typically receive some public recognition for their efforts, which may help promote a company's environmental stewardship profile. Five states have passed legislation to establish GHG registries, of which three are now under way:

New Hampshire: The New Hampshire GHG Registry went into effect in 2001. The registry is intended to record emissions reductions in a state database that can be used in addressing possible future requirements. California: The California Climate Action Registry began operations in 2002. This state registry is arguably the most comprehensive, as participants register all of their GHG emissions for operations in California; other state (and federal) registries cover only emission reductions. The registry has over 100 participants. Wisconsin: The Wisconsin Voluntary Emission Reduction Registry, a registry of voluntary reductions of GHG emissions, went online in 2003.

Numerous states are joining forces to establish a national registry, which may link with regional registries that were previously created. In May 2007, 30 states formed the Climate Registry, which aims to establish a standard system for GHG emissions reporting. As of August 2008, 39 states have joined the registry to support both voluntary and mandatory reporting schemes in the participating states.

Greenhouse Gas Inventories

At least 42 states have developed GHG inventories. Inventories typically provide estimates of emissions for various categories: economic sector (e.g., energy, agriculture), emissions source (e.g., automobiles, power plants), GHGs (e.g., carbon dioxide, methane). In general, states create their inventories by following guidelines developed by the Environmental Protection Agency (EPA) that are based on internationally recognized standards. Inventories are often used to obtain an overall assessment of a state's emissions levels and sources, and are perhaps best suited for monitoring trends and/or developing comprehensive strategies. Although some states have performed inventory updates, most of the states' inventories only cover 1990 emission levels.

State Action Plans

At least 38 states have either completed or are in the process of preparing climate change action plans (see Figure 3 ). Typically, state action plans are drafted by a climate change task force, composed of members with diverse backgrounds and expertise. In general, task force members examine their state's sources of GHG emissions, and identify and rank the policy options that are most appropriate (i.e., cost-effective, politically feasible, etc.) for controlling emissions in their state. Often the state action plan is made available for public comment, revised if necessary, and then submitted for approval to state officials.

Reflecting the fact that states have different economic sectors, natural resources, and political structures, state climate change action plans can vary substantially. Some state action plans focus more on indirect, "no regrets" strategies, such as improved energy efficiency, which will likely yield benefits irrespective of climate change effects. Other state action plans are more comprehensive and recommend a portfolio of direct efforts that address GHG emissions. Although the state climate change action plans may recommend an array of policy options, the plans do not necessarily result in direct actions to reduce GHG emissions. However, the number of completed state plans indicates the interest that a majority of states have in addressing climate change mitigation on some level.

Issues for Congress

The climate change activity in the states raises several issues that may be of interest to Congress. This section discusses some of the potential effects of state action in lieu of federal legislation. This section also examines the limitations of state actions, both from a climate change policy perspective and in the context of legal challenges.

Potential Effects of State Actions

Many states generate significant emissions of GHGs. If individual U.S. states were classified as sovereign nations, 18 U.S. states would rank in the top 50 for nations that annually emit the primary GHG: carbon dioxide. Compared with other nations, Texas, the combined Midwest Accord states, the WCI states, the RGGI states, and California rank as top carbon dioxide emitters ( Table 2 ).

Almost half (23) of the states have joined one of the three regional emission (all GHGs or just carbon dioxide) reduction programs: the Midwest Accord, WCI, and RGGI. The states in these regional programs account for a substantive percentage of U.S. carbon dioxide emissions (about 38%). However, the remaining 27 states are pursuing considerably less aggressive climate change policies. With this range of state activity, it is difficult to predict the precise consequences of state-led climate change actions. This section highlights possible effects from state actions.

States as Policy Laboratories

A central argument in support of state climate change action is that states can serve as laboratories for policymaking. States can test different ideas and policies on a smaller scale, and help determine which climate change solutions are most effective. For example, there has been some debate regarding how a cap-and-trade program might work on a national level. Although the federal acid rain program, which involves sulfur dioxide emissions trading, is generally considered a success, emissions trading programs for other purposes have encountered problems during implementation. State and regional programs offer the opportunity to iron out logistical details that are crucial in a cap-and-trade system:

How high to set the emissions cap. Which sources to regulate. How to allocate emissions allowances. Whether to allow the use of offsets as compliance alternatives. Whether to include a safety valve and, if so, how high to set it.

State programs can inform federal policymakers in other ways. The political process by which states create climate change policy can be enlightening and perhaps adaptable on the federal level. For instance, by examining the development and passage of state legislation, federal policymakers may better understand the motivations of different stakeholders and learn how best to frame the issues.

Possible Economic Effects

Emission reduction programs will likely have economic effects on consumers, businesses and manufacturers, and possibly interstate commerce. The most immediate effects of the emissions programs (at least the ones furthest along in development) will be on the automotive manufacturing and electricity generation sectors.

For automotive manufacturers, the California motor vehicle regulations—which at least 16 states have indicated they plan to implement if EPA approves the waiver (discussed above)—will likely have the effect of dividing the market, potentially requiring the manufacture of a different class of cars to meet the new standards (scheduled to apply in 2009). For automotive companies, this raises the issues of the technical means of meeting the standard, marketing, ensuring compliance, and pricing. Depending on how the emission limits are to be met, they may also influence fueling infrastructure. State governments will need resources to enforce the standards. Consumers in regulated states may face higher prices for vehicles.

Regarding the electric power industry, the mandatory reduction requirements will likely promote generation from low carbon-intensive fuels, while curtailing generation from high carbon-intensive fuels, such as coal. The GHG performance standards in California and Washington will reach into neighboring states as well, effectively barring electricity imports generated by conventional coal-fired power plants. Because coal-fired plants tend to produce lower-cost electricity, the result of these requirements may be to increase electricity prices within the states that limit emissions, and possibly lower prices in states without such emission standards.

If the GHG limitations lead to energy price increases in the regulated states, businesses and manufacturers may factor this cost into location decisions. There is some concern that regulated industries will have a financial incentive to move (and thus transfer jobs) to states (or nations) that do not limit GHG emissions. Others fear that emission limits will raise the cost of living and doing business within those states, although in theory such effects can be at least partially addressed through the design of the emissions reduction program.

Patchwork of Regulations

One concern shared by many observers, particularly industry stakeholders, is that state climate change programs (in lieu of a federal program) will create a patchwork of regulations across the nation. A patchwork system of standards may hinder a company's efficiency and possibly create economic burdens for firms that operate in multiple states. The prospect of regulations that vary from state to state is driving some companies to support a federal climate change program with comparable requirements across the entire United States.

Limitations of State Actions

Climate change has been described as the "ultimate global commons problem." The global warming and climate impacts associated with increased GHG emissions in the atmosphere cannot be linked with specific emission sources. Unlike localized reductions in other air pollutants (e.g., sulfur dioxide, particulate matter), when an emissions source reduces its carbon dioxide emissions, it does not generate a corresponding local climate change benefit unless there are similar widespread reductions globally or at least in wide areas.

From a practical standpoint, the actions of one or a group of states or nations cannot by themselves reduce the global accumulation of GHG emissions in the atmosphere. However, as discussed above, actions now under way by many states in the United States may create examples and/or models that will prove instructive in more widespread applications. Moreover, when business and industry have confronted a growing patchwork of state requirements, these sectors have historically begun to favor a national policy—as has begun to happen in the case of state-level actions on climate change. However, the lack of a national program or a truly global approach to GHG emissions reductions does limit what individual states can accomplish in actually reducing GHG emissions and accumulations.

Legal challenges may further limit the effectiveness of state action. The possibility of legal challenges creates considerable uncertainty regarding the future of state climate change actions, particularly the more aggressive programs. There are already several lawsuits against state actions that seek to regulate GHG emissions from motor vehicles. As discussed above, the April 2007 Supreme Court decision ( Massachusetts v. EPA ) did not specifically address all of the plaintiffs' arguments, so uncertainty remains as to the resolution of these cases.

Further litigation confronting other types of state action is anticipated. However, many expected RGGI to face a legal challenge when the first state's rule was officially issued, but that did not occur. Regardless, there is some question as to whether California's recently enacted GHG performance standards are constitutional. Arguably, the standards disproportionately impact the neighboring states that have historically exported coal-generated electricity to California consumers. The legal arguments in these cases are beyond the scope of this report, but many observers conclude that it is difficult to predict how the courts will interpret and decide upon these issues. For a more in-depth analysis of various legal issues regarding climate change, see CRS Report RL32764, Climate Change Litigation: A Growing Phenomenon , by [author name scrubbed].