New Mexico Adopts Greenhouse Gas Cap-and-Trade Program

The New Mexico Environmental Improvement Board (EIB) adopted by a vote of four to three greenhouse gas reduction regulations—called the most stringent in the US—that will reduce global warming pollutants through a regional cap on greenhouse gas emissions.

The new regulations, adopted by the seven member board, will enable the state to participate in a regional greenhouse gas cap-and-trade program with other US states and Canadian provinces through the Western Climate Initiative (WCI). The WCI is a collaborative of seven western states and four Canadian provinces that are developing strategies to address climate change.

The program, which is scheduled to start in 2012, will affect about 63 large stationary sources that emit at least 25,000 metric tons of carbon dioxide—mainly coal- and gas-fired power plants, and oil and gas operations. Those sources include electric generators and the largest emission sources in the oil and gas sector. Each source would have to reduce its emissions by 2% per year until 2020 or acquire emissions credits from other participants. The program will not be triggered unless at least 100 million on tons of emissions are included regionally, which ensures that New Mexico will not implement a trading program alone.

The program is designed to contain costs to industry and consumers through several mechanisms, including the free allocation of pollution allowances to regulated sources; trading of allowances to allow the market to find the lowest-cost emission reductions; a generous offset program which allows sectors that are not under the cap to implement low-cost reduction measures; and a delay in turning in allowances until 2015.

Economic analyses show a modest net benefit to the New Mexico economy as a result of reducing greenhouse gas emissions and promoting clean energy jobs.

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