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December 7, 2005


New clean air rules balance environmental and economic goals


Governor Mitt Romney today announced that Massachusetts will take another major step in meeting its commitment to protecting air quality when strict state limitations on carbon dioxide (CO2) emissions from power plants take effect on January 1, 2006.


“Massachusetts continues to be committed to improving air quality for all our citizens. These carbon emission limits will provide real and immediate progress in the battle to improve our environment,” Romney said. “They help us accomplish our environmental goals while protecting jobs and the economy.”


Massachusetts is the first and only state to set CO2 emissions limits on power plants. The limits, which target the six largest and oldest power plants in the state, are the toughest in the nation and are designed to lower emissions of nitrogen oxides, sulfur dioxide and mercury from power plant smokestacks.


In addition to reaffirming existing stringent CO2 limits, the draft regulations announced today, which will be filed next week, contain protections against excessive price increases for businesses and consumers. They allow power generation companies to implement CO2 reductions at their own facilities or fund other reduction projects off-site through a greenhouse gas offset and credits program.


Relative to off-site projects, the new regulations propose a two-tiered system of triggers and safety valves. At first, plants can do offset projects in the northeast region, which keeps technology development and environmental benefits closer to home. However, if the price of available offsets reaches $6.50/ton of emissions for 12 months, firms would then be able to shop for offsets anywhere in the world, where cheaper opportunities might be available – thus protecting ratepayers while providing the same environmental benefit. If the price of offsets climbs yet higher to a point with unacceptable economic impacts, or $10.00/ton, firms can then meet their emissions obligations by paying into a Greenhouse Gas Expendable Trust. The Trust will be used by the state to purchase new offsets or invest in the development of technology to reduce greenhouse gas emissions.


The combination of these market-based mechanisms with stringent CO2 caps will lead to cost-effective environmental gains.


“Today’s regulations will achieve our aggressive environmental goals and provide incentives to push technological development,” said Stephen Pritchard, Secretary of Environmental Affairs.


In the development of greenhouse gas policy, Romney Administration officials have elicited input from environmental and economic policy experts. These include John Holden, professor of environmental policy at Harvard University and chair of the National Commission on Energy Policy and Billy Pizer, an economist at Resources for the Future, an environmental policy think-tank based in Washington D.C.


“A safety valve assures that compliance costs will not rise above acceptable levels and guarantees that the market will continue to function despite any unforeseen, adverse events,” said Billy Pizer. “At an appropriate level, a safety valve makes sense for virtually any market-based emissions reduction policy, but especially for one addressing a cumulative problem like CO2 emissions, where the most important element is a continual, long-term incentive for innovative technologies.”


Elements of a safety valve were included in the successful acid rain trading program and would have helped avert the crisis faced by the RECLAIM program in California, when a shortage pushed nitrogen oxide allowance prices to more than $40,000 per ton, far above the normal market price.


Implementing these regulations represents the latest in a series of initiatives that the Romney administration has undertaken to address air pollution. In 2004, Governor Romney announced the Massachusetts Climate Protection Plan, which laid out a coordinated statewide response to reduce greenhouse gas emissions and protect the climate.


Massachusetts has had great success recently in addressing pollutant emissions from both stationary and mobile sources. Last year, the Commonwealth adopted regulations that will capture 95% of the mercury emitted at the state’s four coal-fired power plants by 2012. There have also been major agreements hammered out with the owners of two power plants – Salem Harbor Station and Canal Station in Sandwich – that will guarantee emissions reductions, and ensure regional power grid reliability.



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