New Mexico executive branch considering cap-and-trade

New Mexico is now one step closer to putting a price on carbon. In a report released on Thursday, the state announced plans to “evaluate the adoption of a comprehensive market-based program that sets emission limits to reduce carbon dioxide and other greenhouse gas pollution.”

The report, titled New Mexico Climate Strategy: Initial Recommendations and Status Update, provides a snapshot of the state’s emissions, with initial policy options to address pollution sector by sector. Following this, the document announces the state will “design and implement the most efficient and cost-effective approaches to meeting our climate targets. This will include reaching out to states that are already implementing market-based programs.”

What’s brought us to this point?

New Mexico has shown early warning signs of carbon pricing since late last year, when it passed a senate memorial calling for a study on carbon pricing policy, based on which Climate XChange authored Recommendations for New Mexico Carbon Pollution Pricing Policy.

In January, three weeks into her first term, Governor Michelle Luijan Grisham announced a climate change executive order, setting a greenhouse gas (GHG) reduction target of 45% below 2005 levels by 2030 and establishing a Climate Change Task Force to begin the process of crafting the state’s plan to meet this target.

The legislature shortly followed with appetite for further action, passing into law a Renewable Portfolio Standard of 50% by 2030, 80% by 2040, and 100% by 2045, as well as proposing a carbon pricing bill inspired by Climate XChange’s study, which ultimately died in the Senate Corporations and Transportation committee.

Momentum continued into the fall, when New Mexico hosted Climate XChange’s Southwest Carbon Solutions Summit, convening hundreds of policymakers, businesses, and organizations to discuss and envision the future of climate policy and carbon pricing in the region. 

Will New Mexico join an existing cap-and-trade program?

Due west, California is a part of the Western Climate Initiative (WCI), an economy-wide cap-and-trade program linked with the province of Québec. Prior to the implementation of the program, Governor Bill Richardson intended for New Mexico to join as well. However, due to a political swing in leadership, New Mexico withdrew from the implementation process along with neighbor states Arizona and Utah. Sarah Cottrell Propst, the current Secretary of the Energy, Minerals, and Natural Resources Department (EMNRD), was previously involved in WCI development in the state and may take things in that direction again.

Due east, New Mexico is looking to the Regional Greenhouse Gas Initiative (RGGI) and Transportation Climate Initiative (TCI) for additional guidance on policy design process, implementation, and potential linkage. While linkage with these sectoral programs seems unlikely, success of regional collaboration across 11+ states may inspire regional approaches in the Southwest, where states like Colorado and Nevada have joined the US Climate Alliance, but have yet to form comprehensive state policy roadmaps on how to meet their emissions targets.

What About Fossil Fuel Extraction?

This marks the second time this year that a state with heavy fossil fuel extraction announced plans to implement carbon pricing, following Governor Wolf’s announcement that Pennsylvania would join RGGI last month in addition to the state’s participation in the development process of TCI. 

However, unlike New Mexico, Pennsylvania has provided no indication that such market mechanisms would apply to their extraction industries, nor their residential, commercial, or industrial sectors.

New Mexico’s fossil fuel extraction industry is the largest contributor to greenhouse gas emissions in the state, and continues to grow rapidly. How the state chooses to address this sector, and whether the cap-and-trade program will play a role, may be an important moment in setting precedent for other extractive states.

Source: New Mexico Climate Strategy: Initial Recommendations and Status Update

In the coming months and through next year, NMED and EMNRD will crunch the numbers on where emissions in the state are going, what a suite of complementary policies can achieve, and what remaining reductions need to be achieved by a cap-and-trade program. The Task Force anticipates reporting on their progress in September 2020 with more detailed policy proposals and next steps for putting pen to paper.