America's First Global Warming Cap and Trade Program Is Working, and Here's Why

Martin O'Malley is governor of the state of Maryland.

As the debate over energy independence, climate change, and "green jobs" heats up this summer, Congress and the American public should take note one of the most significant accomplishments related to climate change to date and some of the lessons we've learned. In September 2008, 10 northeastern states, including Maryland, launched the United States's first greenhouse gas "cap and trade system"—and it is working.

The Regional Greenhouse Gas Initiative requires carbon-producing power plants to purchase one allowance for each ton of carbon they emit. Each state auctions a share of allowances quarterly. The goal is reduced carbon emissions. How is carbon reduced? In two ways: First, the number of allowances decreases over time, so by 2018 we collectively reduce carbon from these power plants—a major source of greenhouse gases—by 10 percent. Second, proceeds from the sale of these allowances are plowed back into consumer benefits: energy efficiency programs, renewable energy, technology development, rate relief, and other programs that benefit energy consumers and create "green jobs."

The result? Energy conservation and development of alternative energy is being funded at historically high levels—a commitment by this country that is long overdue. These include projects to weatherize low-income homes, hire and train energy auditors, deploy combined heat and power and district heating and cooling systems, subsidize energy efficiency improvement programs for small businesses, and educate contractors about energy efficiency and other initiatives.

Green jobs are clearly a key part of our future: The Pew Charitable Trust reported in June that the number of jobs in America's emerging clean energy economy grew nearly two and a half times faster than overall jobs between 1998 and 2007. In Maryland, we have set a goal of creating at least 100,000 green jobs by 2015.

The No. 1 goal of this voluntary effort between Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont has always been to show that a market based cap and trade system can work. How do we know its working? Utilities that need allowances have robustly bid in the four auctions of allowances to date. A healthy secondary market for allowances has emerged. This all points to the markets' recognition that this is a viable program with a foregone conclusion—America must reduce its carbon emissions. To date, $366.5 million in RGGI proceeds—earned in less than one year—have been generated for clean energy, energy conservation, and rate relief.

There are some key differences between this program and what's being proposed in Washington. The regional initiative regulates electricity generated by fossil fuels, where federal legislation covers other sectors as well. And the regional program is entirely a market-based system, with auctions of over 90 percent of allowances; proposed federal legislation will auction 15 percent of allowances. While we work on these important features of federal climate and energy policy, let's keep what is most important at the fore.

As the U.S. Senate looks to build on work already done in the House of Representatives to secure national energy independence, create a sustainable energy future, reduce the threat of climate change, and create net benefits for electricity consumers, let's look hard at what's already working. The states in the Northeast have proven it can be done. In these times of great challenges, we have to be willing to embrace the new economy—and to act now for that more sustainable future all of us prefer.

Let's also learn from our experience. Cap and trade is a proven, efficient, market-based approach to solving one of the greatest environmental challenges of our time.

• Check out our political cartoons.
• Become a political insider: Subscribe to U.S. News Weekly, our new digital magazine.
• Is a global treaty the right way to handle climate change?