Climate Change Bills to Receive More Attention in Congress, States

January 16, 2007
Client Alert Newsletter Forecast 2007

With Democrats controlling Congress, climate change bills imposing mandatory cuts on greenhouse gas emissions will receive a great deal of Congressional attention in 2007. As of this writing five federal climate change bills have been introduced, each capping greenhouse gas emissions from various sources. At the same time, a Senate resolution has been introduced calling for the U.S. to resume international negotiations on greenhouse gas issues, and a new House committee has been created focusing on climate change. Still, the prospect of enacting a federal climate change bill in 2007 remains low. Most congressional Republicans, and even some Democrats, traditionally oppose mandatory federal legislation. Even if a bill made it through Congress, President Bush would likely veto any mandatory greenhouse gas emission cuts. Thus, 2007 may lay the groundwork for future legislation. Eventually, the federal government will likely enact mandatory greenhouse gas limits.

Beyond the Beltway, individual states in 2007 will continue to implement mandatory greenhouse gas programs. In the northeast, Regional Greenhouse Gas Initiative ("RGGI") states, including New Jersey and Delaware, will work to adopt a mandatory carbon dioxide ("CO2") cap-and-trade program for power plants. RGGI states are required to adopt such rules before January 2009. In late 2006, New York was the first to publish a draft RGGI regulation that notably would auction all CO2 emission allowances in lieu of allocating them to existing sources. The new Massachusetts governor, who recently announced that his state would rejoin RGGI, has also promised a 100% CO2 allowance auction. It is unclear whether the other RGGI states will follow these leads. Meanwhile, California's Air Resources Board continues to prepare regulations implementing A.B. 32, legislation also requiring a statewide CO2 cap-and-trade program. Governor Schwarzenegger issued an Executive Order last year requiring that any such regulation coordinate with RGGI states on issues such as purchasing offset allowances. How that order will affect developing regulation in California and the northeast remains to be seen.