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Western States to Create Carbon Market

Faced with declining prospects of a national bill, 2 western U.S. states and 3 Canadian provinces are set  to establish a market for carbon credits by 2012.

As U.S. prospects for a national climate change bill fade, five U.S. states and Canadian provinces are on track to start a cap-and-trade market for carbon dioxide in 2012. California, with the eighth-largest economy in the world plans to join New Mexico as well as the Canadian provinces of Ontario, British Columbia and Quebec in establishing a market-based system meant to combat climate change and boost the economies of both regions. The plan follows the already working cap-and-trade system in the Northeast U.S., although the western market would be approximately four times bigger in geographic size when fully implemented.

Cap-and-trade systems put limits on pollution -- in this case, gases that suck up heat and warm the planet -- which are decreased year by year. Polluters must acquire emissions credits, which can be bought and sold. If a factory can make changes to cut pollution for less than the price of a credit, it is likely to do so, then sell unneeded credits at a profit.

Advocates of climate change cap-and-trade systems would have preferred that more states join the effort – or even better, a national market be created – but so far, such initiatives have failed. As it is, the 11-member Western Climate Initiative had originally planned a larger effort that would have covered most of the Western U.S. as well as 4 of the 10 Canadian provinces, but Arizona says it won't join cap-and-trade, and states like Washington and Montana have not obtained legislative approval.

If the current five members stay on track, emissions from power plants and other sources will begin trading in 2012, with transportation industries included in 2015. The western cap-and-trade market would be roughly equal in size to tenth of total U.S. emissions.
Published Mar 16 2010, 04:07 AM by moneycoach
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