EMISSIONS  (CONT)

This system of allowances and offsets is intended to encourage technological innovation. A similar program was established in the early 1990's to handle the problem of acid rain.
In an attempt to keep Massachusetts in the agreement, the other states amended their original proposal last week. If allowances exceeded $7 a ton, the amount of pollution offsets available would increase. If allowances exceeded $10 a ton, offsets would increase even more, and would be allowed to be financed anywhere in the world.

But Mr. Romney did not accept the compromise, and Massachusetts will enact its own program next year. The changes, however, have remained in the plan.

Based on cost estimates done by the states, average household bills could go up by about $20 a year, although some plant operators claim the increases will be much higher.

Andrew O. Ertel, president of Evolution Markets, a brokerage firm in White Plains that handles emissions allowance trading around the world, said the last-minute changes would help create a workable market.
"They add a layer of complexity," Mr. Ertel said, "but in the end they are going to lead to low-cost reductions in CO2 and true environmental benefits."

Each of the seven states will issue draft regulations for public review early next year. States must then either submit them for legislative or regulatory approval.

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