Sheldon Zakreski, The Climate Trust
Weekly Policy and Finance Update – August 28, 2017
|Bottom line | The Northeast cap and trade program has been popular and advanced clean energy goals. The program’s updated stringency will generate meaningful CO2 emission reductions.|
Nine northeastern states pioneered the use of cap and trade to control carbon dioxide emissions from the power sector by launching the Regional Greenhouse Gas Initiative (RGGI) in 2009. The program has proven popular and New Jersey and Virginia are now debating whether to join Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, Delaware and Maryland as participating states.
Despite naysayers noting it would be ruinous economically and spike energy prices, RGGI has been a boon for its participating states. Since its launch, RGGI has generated $2.6 billion from auctioning emission allowances to regulated utilities. Much of these funds have been directed back into the power sector in the form of consumer benefit programs such as energy efficiency incentives, and financial supports for low income energy customers. The program is credited with generating $2.9 billion in economic growth, 30,000 jobs, $618 million in energy bill savings, and $5.7 billion in public health benefits.
The challenge with RGGI is that the extent to which it has produced meaningful carbon reductions is debatable. While emissions haven fallen, a large driver in reductions has been the switch from coal to gas-fired electricity due to fuel costs for gas becoming substantially lower than the cost of coal. Indeed, this is borne out by allowance prices, which started at $1.86 in 2009 and currently sit at $3.33. By contrast, offsets for California’s program fetch a price of more than three times the RGGI allowance price. This is why many forestry offset projects originating in RGGI states are sold in California as the costs of those offsets cannot compete with RGGI’s allowance prices.
RGGI has made the leap to extend the program beyond 2020, committing to reduce emissions by 30% by 2030. This development aligns with real world experience that has shown economies can grow with robust carbon prices. In participating RGGI states, electricity rates have come down by 3.4% while their economies have experienced higher growth than the rest of the country. This program extension might also create the added benefit of landowners in RGGI states finally being able to produce verified emission reduction offsets for the RGGI market, leveraging further economic growth from this cap and trade program.
Huge Climate Opportunity If RGGI Governors Step Up
Bruce Ho and Jackson Morris, Natural Resources Defense Council blog, August 14, 2017
The Regional Greenhouse Gas Initiative, explained
David Roberts, Vox, February 28, 2017
The Regional Greenhouse Gas Initiative Status Report
Acadia Center, July 2016
NE States Just Delivered A ‘Major Victory’ Against Climate Change
Alexander C. Kaufman, Huffington Post, August 23, 2017
Northeast States Talk Big On Climate. This Is Their First Serious Test
Alexander C. Kaufman, Huffington Post, July 24, 2017
Malloy should support a strong RGGI for a stronger Connecticut
Martha Klein, New Haven Register, August 7, 2017
Md. governor must match environmental claims with actions
Sara Via, Baltimore Sun, August 12, 2017
Cap and Trade is All Right
Sheldon Zakreski, The Climate Trust, June 5, 2017
Image credit: Flickr/Bemep