The Morning Economic Report
9:18 am
Mon June 16, 2014

Carbon Emissions Cap - 6/16/14

There are some who believe that the Environmental Protection Agency’s new requirements for power plants will curtain economic growth.  These requirements require plants to reduce emissions, which could increase the price of electricity.  But a recent New York Times article highlights evidence suggesting that such beliefs are at least somewhat unwarranted.  Nine states already belong to a carbon emissions cap and trade system known as the Regional Greenhouse Gas Initiative. 

In a cap and trade system, the government places a limit on total carbon emissions.  Companies are issued permits that allow then to emit a certain level of greenhouse gas.  If they emit less than they are allowed, they can sell rights to pollute to others.  The nine states already in the program are Connecticut, Delaware, Maine, Maryland, Massachusetts, New York, Rhode Island and Vermont.  These states have substantially reduced their carbon emissions in recent years, but several of these states have produced strong economic growth than the balance of the nation. 

Since 2009, these 9 states have reduced their emissions by 18 percent, while their economies expanded 9.2%.  By comparison, emissions in the other 41 states fell by just 4% and their economies expanded by less than 9 percent.