RGGI requires a cautious approach.

Ten states in the Northeast, including New Hampshire, are part of the Regional Greenhouse Gas Initiative, or RGGI, which seeks to reduce the amount of carbon dioxide emissions from participating states' fossil fuel power plants.

Power plants in each participating state will need to purchase CO2 allowances through a regional auction, which would permit them to emit a certain amount of CO2 each year.

House Bill 1434 will determine how New Hampshire participates in the regional auction, including what safeguards are needed to limit electricity price spikes and how to ensure the availability of CO2 allowances. The bill also establishes a Greenhouse Gas Emissions Reduction Fund, collected from the sale of New Hampshire's allowances, to promote energy efficiency programs.

The Business and Industry Association supports the intent behind RGGI. While the BIA would prefer a national approach to addressing climate change, we recognize political forces in New Hampshire are aligned to pass HB 1434. But it is important for policymakers to remember that many businesses in New Hampshire, especially manufacturers and high-technology companies, face intense global competition for market space.

Energy, health-care and labor costs in the Northeast are already among the highest in the country. Deliberately raising energy rates through RGGI, especially as we head into a soft economy and perhaps a recession, is a serious matter and deserves careful, constructive scrutiny.

The BIA is seeking improvements to HB 1434 to protect energy customers. The regional auction allows anyone to purchase CO2 allowances. What happens if outside interest groups or speculators with no stake in New Hampshire's power market purchase these allowances?

For example, what would happen if an environmental organization, in a quest to achieve greater CO2 reductions, purchases allowances and retires them permanently? Simple supply and demand tells us this would drive up the cost of CO2 allowances and increase energy costs for businesses and residential customers alike.

A recent University of New Hampshire study tried to determine the fiscal impact of RGGI, but in truth no one knows. HB 1434, as introduced, had no upper limit to the cost of a CO2 allowance, and therefore had no limit to how expensive electricity in New Hampshire could become.

Recognizing these concerns, the Department of Environmental Services recently proposed amendments to HB 1434 that establish price protections to insulate energy consumers from severe price spikes and market fluctuations. The department also proposed changes that would allow for the direct sale of CO2 credits in times of scarcity resulting from market speculation. These measures are steps in the right direction.

Finally, there is the issue of protecting the allowance revenue that would accrue to the Greenhouse Gas Emissions Reduction Fund. HB 1434 states the funds will be used to "support energy efficiency, conservation and demand-response programs." However, time and again we have seen the state clip into funds intended for equally worthy causes to fund budget shortfalls.

BIA is actively engaged with stakeholders in trying to address our concerns with HB 1434. The RGGI train has left the station. BIA's goal is to direct the train to its best destination.

Jim Roche is president and CEO of the Business and Industry Association.