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A bill that would cap carbon emissions from the state's power plants received resounding approval from those testifying before a House committee yesterday.

Gov. John Lynch urged the Science, Technology and Energy Committee to pass the bill, which would make New Hampshire part of the 10-state Regional Greenhouse Gas Initiative. Senate President Sylvia Larsen of Concord, a co-sponsor, called it the most important initiative before that the Legislature this session. Public Service of New Hampshire, the power company that would be most affected by the plan, said it approves of the bill overall.

The bill would require power producers in New Hampshire to purchase credits from a regional auction to emit carbon dioxide, a gas that contributes to global warming. Revenue from the credits would go into a fund used for making homes, businesses and industries in the state more energy efficient.

University of New Hampshire economists Ross Gittell and Matt Magnusson showed lawmakers that it will cost the state less to join RGGI than to do nothing.

New Hampshire buys about 50 percent of its power wholesale from the New England power grid, Gittell said. Because other states have already pledged to participate in the program, power on that grid will increase in price whether or not New Hampshire participates.

If the state does nothing, the cost to utility customers will be $7 million in 2009, according to their report. If the state participates, the cost would be $20 million, but the program would produce $17 million in revenue to be used for energy efficiency. That means the net cost would be about $3 million.

"It makes sense for New Hampshire to participate in RGGI on an economic basis," Gittell said.

The program was initiated in 2005 because of the absence of national carbon controls. It is significant because the nine states between Pennsylvania and Maine, if they were a country, would be the seventh-largest emitter of carbon in the world.

New Hampshire has been allocated 8.6 million credits. Power producers in the 10 states would have a total of 188 million credits available to them for auction, with one credit equaling one ton of emissions. Each state in the program could decide how to distribute the credits, whether to auction them or give them away. The UNH report argued against the latter because there would be no revenue source to offset the cost.

PSNH Business Director Terry Large said the company "wholeheartedly supports the concept of the RGGI program." But, he said, changes would be needed to make sure the credits remain affordable and available.

Spokesman Martin Murray said the company has concerns about brokers who are not power producers but will be able to purchase the credits and drive up prices.

"There is no assurance that generators that need the allowances will get them," he said.

Director of the Air Resources Division Bob Scott said the auction is a free-market model, but the regional group is looking at adding some guidelines for who can participate. He said it is not likely there will be a shortage of credits because early projections show that the group may have overestimated what would be needed. Energy production and emissions have been lower than expected, he said.

In the first few years, 25 percent of the state's credits will be granted to Public Service of New Hampshire to essentially reimburse the company for the efforts it made in converting a Portsmouth coal boiler to wood. The remaining 75 percent will be auctioned.

Power producers may also cover up to 3.3 percent of their emissions by participating in programs that are not related to power but that capture or hold onto carbon, such as planting trees.

Scott said the program would level regional emissions at 188 million tons through 2014 and then reduce that by 10 percent by 2018. (next page »)