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States’ Group Calls for 45% Cut in Amount of Carbon Emissions Allowed

The Regional Greenhouse Gas Initiative, the country’s first regional system for capping carbon emissions and creating a market in carbon allowances, proposed a fundamental change on Thursday to increase electrical utilities’ incentive to cut emissions from fossil-fuel plants by raising the cost of compliance.

The regional group proposed a 45 percent reduction next year in the total carbon dioxide emissions allowed. The cut is not as draconian as that number suggests, however, because the new total of 91 million tons reflects the current emissions level after five years of a slumping economy and increases in renewable energy and energy-efficiency measures.

The reduction from 165 million tons is expected to raise the price of compliance, and further reductions of 2.5 percent annually were likely to increase the value of the allowances that utilities must submit for every ton of carbon dioxide, or its equivalent, that they emit.

If the proposal goes into effect, the analysis done by the group, which is a collaboration of nine states to cut carbon emissions, indicates that by 2020, allowances that are now trading at $1.93 could trade as high as $10. That would be roughly at the level where allowances for California’s new economywide cap-and-trade system were auctioned last fall.

Cap-and-trade, a system of controlling carbon emissions by putting a price on them and therefore creating economic incentives for businesses to cut energy use — and for investors to back new businesses creating energy from renewable sources — was abandoned by Congress in 2009, leaving the regional group and the California system to forge new markets on their own.

States in the group are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

Richard K. Sullivan Jr., the Massachusetts secretary of energy and environmental affairs, said in an interview that the proposed change was being made in accordance with group’s original plans for a five-year review of the program. “I think there was a genuine expectation that the cap would be reduced to hew to the goal of driving down greenhouse-gas emissions,” he said.

He said that in his state, 71,000 new jobs had been created in the clean energy sector since the cap-and-trade system covering state utilities was put into place.

But conservative opponents of such systems were quick to label the proposal a new tax on energy consumers. Americans for Prosperity, one such group, released a statement by Steve Lonegan, its New Jersey state director, saying, “Electricity consumers have been paying a job-killing tax with zero benefit. Now ratepayers in the remaining nine R.G.G.I. states are going to be walloped thanks to this diktat from a bunch of unaccountable bureaucrats.”

New Jersey withdrew from the regional compact after the election of Gov. Chris Christie.

Mr. Sullivan of Massachusetts pointed out that the new proposal included a safety valve for utilities should prices rise too far too fast. That takes the form of a reserve pool of allowances that can be drawn on if prices exceed set levels: $4 in 2014, increasing $2 a year through 2017.

A version of this article appears in print on  , Section B, Page 4 of the New York edition with the headline: States’ Group Calls for 45% Cut in Amount of Carbon Emissions Allowed. Order Reprints | Today’s Paper | Subscribe

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