July 7, 2010 / 10:09 PM / 7 years ago

Western Climate group sees carbon cuts and savings

* Plans could produce $100 billion in savings

* Sees carbon price at $33 per tonne by 2020 (Figures in U.S dollars unless noted)

By Allan Dow

VANCOUVER, July 7 (Reuters) - A coalition of U.S. states and Canadian provinces planning a cap-and-trade market to curb carbon emissions, can meet their environmental goals and reap modest cost savings, a study released on Wednesday said.

The analysis by the Western Climate Initiative (WCI) said the effort to foster a clean-energy economy can significantly reduce emissions of the greenhouse gases linked to climate change and achieve about $100 billion in net savings by 2010.

California, British Columbia and Ontario are key members of the 11 states and provinces in WCI, which aims to cut emissions to 15 percent below 2005 levels by 2020 through the cap-and-trade system, as well as through complementary policies such as energy efficiency regulation.

Cap-and-trade systems, which are already in place in Europe and the U.S. Northeast, place a cap on pollution and let power plants and other big producers of greenhouse gases buy and trade emissions credits.

The systems count on market efficiency to drive pollution cuts for the cheapest price.

The analysis released on Wednesday expects carbon to trade around $33 a tonne in 2020, with world oil prices at that time at $112.05 a barrel and coal at $27.38 a ton. An earlier report for the BCI estimated carbon at $24.

Carbon is now trading in Europe for about $20 a tonne

The first stage of the BCI cap-and-trade system is scheduled to begin in 2012, but not all the members will ready to participate until later.

Critics say the environmental restrictions will hurt the economy, and California's plan to aggressively pursue a climate change agenda is likely to be an issue in the state's gubernatorial race this fall.

The WCI researchers acknowledge the predicted $100 million in cost-saving is modest and represents less than 0.2 percent of the combined economies of the BCI's 11 members.

The savings would come from increased energy efficiency and reduced fuel consumption, and would be in addition to any benefits resulting from a cleaner economy or spinoffs from new investments in the "green economy," the report said.

The report says that will be important for the WCI to allow banking of carbon allowances and the use of offsets to meet the emission reduction targets.

The report comes a day after another WCI study warned the expected emissions reduction in three of its Canadian members -- Quebec, Ontario and Manitoba -- would increase emissions in neighboring U.S. states that are not part of the group.

The higher emissions would come from increased power production in those non-WCI jurisdictions being used to replace that lost as coal-fired generating facilities in Ontario are closed down.

This "CO2 leakage" can be reduced if WCI and regional emission trading systems co-ordinate how electricity is shared over the power grids in eastern North America, the study said. (Reporting Allan Dowd; editing by Rob Wilson)

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