"It's incumbent upon states to take steps to combat rising carbon dioxide levels"

New Jersey's governor signed into law a bill that requires a 10 percent cut from current levels in power plant emissions by 2019. The law authorizes the state to assign or auction what essentially amount to pollution permits, establishing a cap-and-trade market. If power plants can't meet their required reductions in greenhouse gas emissions, they must buy credits from competing plants that made extra cuts.

The key is how many permits are created and how the permits are distributed. In Europe, too many credits under its previous regime were assigned and prices for carbon collapsed. Also critical - will permits be freely given or auctioned? Critics argue freely distributing permits (as has been proposed) steals clean air from tax payers. New Jersey's effort is part of the Regional Greenhouse Gas Initiative, which is launching a carbon market among 10 East Coast states in 2009. New York plans to auction all of its permits, which should create encourage steeper cuts in emissions by placing a higher price on greenhouse gases.

It's now up to the New Jersey Department of Environmental Protection to decide what to do with those valuable permits. Expect intense pressure from utilities which want to see them handed over.