REGULATORY DEVELOPMENTS

December 2007

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New York Implements Terms of Regional Greenhouse Gas Initiative Agreement and Issues Proposed Regulations to Reduce Carbon Dioxide

New York Governor Eliot Spitzer announced on October 24, 2007 that proposed regulations were issued by the state Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA) to implement the Regional Greenhouse Gas Initiative (RGGI) measures, which are intended to reduce greenhouse gases in New York state and the region. In an unusual move, the proposed New York regulations were pre-released December 5, 2006, subjecting them to public comment prior to their formal promulgation as proposed regulations. The proposed regulations, which will be subject to a sixty-day public comment period, would establish a cap-and-trade program to reduce carbon dioxide emissions by fossil fuel-fired power plants starting in 2009. The proposed regulations include provisions contained in a model rule adopted by RGGI member states in 2006 and certain New York state-specific requirements. One of the key provisions in the proposed regulations would require power plants to purchase one percent of its allowances at an auction for every ton of carbon dioxide it emits, which is a different approach from typical cap-and-trade programs in that sources are given certain allowances for free. The proposed regulations provide that proceeds from the sale of the allowances would be used by the state for energy efficiency and clean energy technology programs. The regulations will be subject to public hearings December 10 and December 11.