Western States Agree to Cut Greenhouse Gases:

Five Western governors agreed yesterday on a plan to cut their states’ emissions of gases linked to global warming and to establish a regional carbon-trading system, though they stopped short of saying how drastically they will seek to reduce greenhouse gases.

The governors — [from] California,? Arizona, Oregon, New Mexico and Washington — said that within six months they will set a regional target for lower emissions. A year after that, they pledged, they will devise a regional cap-and-trade system allowing polluters to buy and sell greenhouse gas pollution credits.

These states join a group of Northeastern states which have been organizing a similar compact, and New Mexico had already joined the Chicago Climate Exchange, committing to a gradual decrease in net greenhouse gas emissions based on tradeable credits.

These regional pacts are good starts, they show the power of the markets and encourage states and businesses to think about new ways of doing business.

The problem is that they can also encourage free-loaders to relocate out-of-state, near enough to continue supplying existing customers without being subject to the rules. This is why a national system of cap-and-trade is important.

As Reed Hundt points out, the other important change we need is a serious review of federal, state, and local regulations. One shift that his analogy to the telecommunications sector makes clear is to decouple the transmission network from the generators. Right now, utilities own the lines and the generation. They can buy power from other sources, but consumers cannot.

Without that sort of change, it’s impossible for the average consumer to make any real commitment to clean energy (short of installing solar cells, geothermal, or a wind farm in the backyard). Add on a renewable portfolio standard for the owner of the transmission grid, and cap and trade for good measure, and you’ve got pressure at multiple levels operating to encourage real innovation in power generation.

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