Leader of the Pack • An Arizona Department of Environmental Quality report says the state has the fastest growth rate of greenhouse-gas emissions in the United States. The costs of a new emission-reduction plan are sparking controversy.

A Western-states plan to reduce greenhouses could make Arizona healthy and wealthy — or cripple the state with high energy costs.
It depends on which lens you look through.
The Western Climate Initiative on Sept. 23 released its recommendations for reducing greenhouse gases for its seven member states including Arizona and four Canadian provinces. Greenhouse gases are linked to global warming.
Steve Owens, the director of the Arizona Department of Environmental Quality, said doing nothing could be expensive — in dollars and other ways.
Citing the state’s prolonged drought, he said, “We’ve already seen the cost of climate change in Arizona. If we don’t do something now to start reducing our greenhouse-gas emissions, the costs are just going to be increasing in the future.”
Those costs could include impacts on health — from extremely hot summers, for example — and the environment, he added.
Owens is WCI co-chairman.
In a news release, DEQ said Arizona has the fastest growth rate of greenhouse-gas emissions in the United States.
But business groups fear WCI recommendations could lead to a big spike in energy prices, said Ann Seiden, a spokeswoman for the Arizona Chamber of Commerce and Industry.
She cited consumer frustration over high gasoline prices. That could spread to other energy sectors under WCI, she said.
“We feel that this is absolutely the worst time to put in place a policy that will undoubtedly raise energy cost for consumers and businesses,” Seiden said.
Supporters of the WCI recommendations, however, see things differently. The Arizona Public Interest Research Group (PIRG) said the WCI plan would lead to more efficient energy use and greater reliance on renewables.
In addition, it would stimulate economic growth and create new jobs, said Diane Brown, Arizona PIRG executive director.
“Ultimately, WCI will make energy costs competitive and give more affordable alternatives to fossil fuels,” Brown said.
The arguments for and against WCI, however, could be moot, considering the complexity of implementing such a plan.
Each state will have to work out matters of enforcement and compliance.
In Arizona, Gov. Janet Napolitano has to figure out how best to move on the recommendations. That includes determining what regulatory authority the governor and DEQ already have, as well as what needs to be worked out with the Legislature and the Corporation Commission, said Jeanine L’Ecuyer, the governor’s communications director.
It’s still early in the process, she added.
She couldn’t say if the governor planned to take this up in the 2009 session.
“No legislative package exists. That decision has not been made,” L’Ecuyer said.
But the state’s largest utility has complained that plans for enforcement remain vague. Arizona Public Service and other large electricity providers would fall under WCI recommendations. But APS, in written comments to WCI, said state legislatures and public-utility commissions had little input even though they might well play a major role in crafting laws and regulations.
“For example, APS does not believe that the Arizona Corporation Commission, which regulates APS … has been given a sufficient voice in this process,” APS said in a June 6 statement.
However they’re implemented, the recommendations set a number of benchmarks. Overall, WCI seeks to reduce greenhouse-gas emissions 15 percent below 2005 levels in member states and provinces by 2020. That would be achieved through a cap-and-trade system in which high emitters can purchase carbon allowances from low emitters.
Each year would see a lower cap in greenhouse emissions. The main one is carbon dioxide. The caps would be apportioned among the states, which would in turn set caps on each facility that pumps out more than 25,000 tons of greenhouse gases a year. Caps would be in place Jan. 1, 2012.
At first, 10 percent of all allowances would have to be bought and sold on the auction block. That would rise to 25 percent by 2020. These allowances could not be traded in one-on-one deals.
Competitive bidding at auctions could raise the price. Utilities object to the open-market requirements.
That leads to a double burden as they seek to invest in renewable sources, said Rob Taylor, an attorney in Salt River Project’s regulatory affairs group.
“We’d have to pay a second time to buy the allowance,” Taylor said.
Environmental groups favor the open-market system. DEQ’s Owens said they could purchase allowances with a high bid and “retire” them. Those allowances would no longer be available to polluters exceeding the cap.
The 2012 caps would apply to utilities and other industrial-emission sources. Automotive and smaller sources of pollution would be covered by caps beginning in 2015.
Allowances could be traded or purchased within the WCI partnership.
In addition to Arizona, WCI partners are California, New Mexico, Utah, Washington, Oregon, Montana, British Columbia, Manitoba, Ontario and Quebec. In the future, Owens said, WCI might work with other regional cap-and-trade systems, including the Northeast’s Regional Greenhouse Gas Initiative.
Many businesses and utilities, however, largely favor a federal approach over a regional one. That includes SRP; a regional program is too piecemeal, SRP contends.
In a June 6 comment on WCI draft recommendations, SRP said: “A federal approach is more likely to produce a program that will result in consistent, equitable, efficient and cost-effective climate change policies.”
Right now, no federal plan exists to regulate greenhouse gases, though both presidential candidates — John McCain and Barack Obama — support a carbon cap-and-trade program.