11/02/2010 03:12 pm ET Updated May 25, 2011

New Mexico May Adopt Cap-And-Trade Plan

ALBUQUERQUE, N.M. (AP) -- New Mexico regulators are set to decide Tuesday whether to adopt a state proposal that would establish a cap-and-trade program to control greenhouse gas emissions.

The New Mexico Environmental Improvement Board is considering a petition by the Environment Department that would allow the state to participate in a regional cap-and-trade program with other Western states and Canadian provinces that make up the Western Climate Initiative.

Under the state's plan, the program would not be implemented unless there were sufficient greenhouse gas allowances to make trading efficient and cost-effective. It also includes a sunset provision if the federal government were to implement its own program.

State officials said the cap-and-trade program would be a first step toward getting a handle on New Mexico's emissions.

New Mexico's coal-fired power plants and the oil and gas industry pump about 24 million metric tons of carbon emissions into the air each year. The state aims to curb the emissions of those that emit 25,000 metric tons or more.

The proposal calls for 2 percent reductions to begin in 2012. Facilities that are over the cap would be able to buy and even bank allowances or offsets as part of the trade mechanism. Facilities under the cap could profit by selling their unneeded emission allowances.

About five dozen facilities would fall under the rule, but that number could grow, as the Environment Department says it would eventually look to expand the scope of sources and emissions to account for industrial, commercial and residential buildings as well as transportation fuels.

Jim Norton, director of the department's Environmental Protection Division, said New Mexico has a chance to be a leader when it comes to adopting climate regulations. With global warming, he said the state could face more drought, reduced snowpack and more intense wildfires.

Critics argue that New Mexico's emissions are only a fraction of the global problem and that handicapping the state's businesses with another regulation could prove economically disastrous.

Public Service Company of New Mexico, the state's largest electric utility, and Colorado-based Tri-State Generation and Transmission Association Inc., which provides power to rural co-ops, have said there will be costs to comply with the proposed regulations and those costs will have to be passed on to customers.

Lawyers and experts on both sides spent days testifying before the board earlier this year, and dozens of people turned out for public comment sessions.

Board members have been reviewing testimony and other documents related to the case to prepare for the deliberations.