Connecticut bill could allow for new CO2 markets

Connecticut lawmakers are weighing legislation that would allow the state Department of Energy and Environmental Protection (DEEP) to set more granular greenhouse gas (GHG) emission reduction targets and adopt "market-based compliance mechanisms" to meet them.

Republicans have mobilized against the bill, which they say could allow regulators to revive the multistate Transportation and Climate Initiative (TCI) program that would have created a cap-and-trade market for transportation fuels in the northeast US but collapsed in 2021. Environmentalists counter that the bill gives the agency the necessary authority to meet the state's existing climate targets, which include cutting GHG emissions 45pc from 2001 levels by 2030.

Backed by DEEP commissioner Katie Dykes, the legislation passed the General Assembly's joint Environment Committee on a party-line 22-11 vote last month. It is pending before a nonpartisan legislative office that reviews legal implications and is poised to come before Senate leaders by next week, who could opt to send it to another committee or ready it for a floor vote.

The bill incorporates various proposals backed by climate groups, including a formal net-zero GHG emissions by 2050 target and a requirement that DEEP evaluate zero-carbon or energy storage alternatives when considering approving permits from fossil fuel-fired power plants. But fuel suppliers have expressed the most concern about the bill requiring DEEP to set sector-specific emissions targets by January 2025 and weigh new market-based emissions reduction strategies.

The bill is "a threat to everyone who uses fuel," Connecticut Energy Marketers Association president Chris Herb said last week.

The legislation specifically calls for sectoral targets for heating and cooling, industrial processes, natural gas distribution, and natural and working lands but clarifies that DEEP can set additional targets for "any other sector or source the commissioner may designate as necessary." The bill also does not limit which market-based programs DEEP could propose through rulemaking and allows for partnerships with other "interested states and Canadian provinces."

An initial bill was pared down to remove requirements that DEEP set emissions targets for small off-road engines like lawn mowers, though Democrats rejected a separate proposal specifically exempting agriculture from DEEP's authority. Democrats control the governor's office and both chambers of the legislature.

Many of Connecticut's neighbors have looked closely at new market-based strategies to curb emissions, even after concerns about costs derailed TCI, which would have covered multiple northeastern states.

Vermont, Massachusetts, and New Jersey are in various stages of considering clean heat standards covering heating fuels. New York — which, like Connecticut, participates in the Regional Greenhouse Gas Initiative power plant CO2 cap-and-trade program — is currently developing an economy-wide carbon market and has long weighed a separate low-carbon fuel standard covering transportation fuels.

By Cole Martin