Cap and Trade Rules
Cap and Trade Emissions Bill Passes Out of House Committee

By Judy Vue
P-I Reporter
February 18, 2009

Washington state just got one step closer to reducing greenhouse gas emissions.

House Bill 1819, which has the backing of Gov. Chris Gregoire, passed out of
committee this week. The bill would impose a cap and trade system, in which a
cap would be placed on companies' emissions. They would be required to buy
permits in order to emit at the acceptable level. Companies also could auction
off their permits between each other, creating their own market system.

The cap and trade system would be a regional effort by a coalition called the
Western Climate Initiative, which consists of six other states and four Canadian provinces.

Many businesses have objected to the bill, saying it would force them to raise
consumer prices of their products, make cutbacks in production and lay off workers.

So can businesses go green without hurting themselves in the process? They won't
know until they try, said Michael Meehan, chief executive officer of
Carbonetworks, a company that helps other companies manage their carbon
footprint by applying software that helps companies see their emissions as
financial assets or liabilities.

Meehan said there were three types of people who can produce environmental
change: one, a politician; two, an activist.

"I'm not either of those," the businessman said. So what's the third one?

"I honestly believe business is the key to a better environment," he said.

Meehan was blunt about how cap and trade may affect businesses. "It's true some
companies are not going to win," he said.

But Meehan is confident that many other companies can make the needed changes
and prosper in a green economy.

"These other companies haven't done their homework. They can't make a judgment
call for what (effects) cap and trade is going to have on them. You can't manage
what you can't measure."

He said that companies may very well be sitting on assets and not even know it
unless a cap and trade system helps them realize it.

Not all businesses have objected to the cap and trade legislation. One of the
strongest supporters is McKinstry Co., a design construction company based in
Seattle that Gov. Gregoire and President Barack Obama have praised for their
efforts in sustainability.

"We need to suck it up and innovate," said chief executive officer Dean Allen at
a public hearing on the bill earlier this month.

Ash Awad, vice president of energy services, agreed that was the company's stance.

"My advice [to other companies] would be, as you think about the risks, think
about the opportunities that come from greening your business. Companies that
don't act appropriately and timely could suffer a significant loss. Look at the
Big Three automakers," he said.

Many companies have voiced concern that now is just not the right time to think
of such a system in the face of a poor economy.

"[But] this shall pass and we are going to get past this," he said. "Climate
issue need attention now [and] we can't wait until the economy is perfect before
we adopt ideas like cap and trade."

However, one of the other concerns critics have is that the auctioning of
allowances opens room for market manipulation that could reach Enron-like
proportions, which advocates have admitted is a genuine risk. But officials say
that an oversight body will be created in order to prevent that.

While Washington, Oregon and other states in the Western Climate initiative wait
for the bill's fate, a cap and trade system has already been established on the
East Coast since September.

The system is administered by WCI's counterpart, the Regional Greenhouse Gas
Initiative. Auctions for allowances are held each quarter and so far, two have
been conducted.

The first auction raised $37.5 million and the second, $106 million, according
to RGGI officials.

Jonathan Schrag, executive director of RGGI, said that in order to prevent
market manipulation, an independent market monitor, Potomac Economics, would
keep track of the auctions.

"The post settlement auction report provides an enormous amount of information
the public," Schrag said. That information is available on the RGGI Web site, at

"The things it doesn't [show] is which company bid how much money and ...current
holdings because (Potomac Economics said) those would actually encourage market
manipulation," he said.


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