The Regional Greenhouse Gas Initiative of the New England and Mid-Atlantic States

Summary:  The Regional Greenhouse Gas Initiative, including the six New England states and four Mid-Atlantic states, is the oldest greenhouse gas reduction regime in the U. S, using a cap-and-trade mechanism. Greenhouse gases are responsible for global warming occurring in recent decades.  It is also the most modest, affecting only emissions originating from electric power plants.  Since it began operating in 2009, it has collected large sums of money and has led to the creation of many new jobs and businesses.  While this modest beginning is praiseworthy, it is important to strive toward major, significant reductions in greenhouse gases, so that the increased level of greenhouse gases in the atmosphere can be stabilized.  

Introduction:  In recent years three regional initiatives have been set in place in the U. S. The Western Climate Initiative, formalized in February 2007; the Midwestern Greenhouse Gas Reduction Accord, set in place in November 2007; and the Regional Greenhouse Gas Initiative (RGGI), established in July 2007.  RGGI is discussed in this post.  The three regional accords encompass 23 states in the U. S. as well as several Canadian provinces.  Additional states and provinces are “observers” of the various accords.

The American states participating in these three agreements, and their greenhouse gas emissions, are shown in the following map:

Map displaying the three regional greenhouse gas emission reduction programs in the U. S. (omitting Canadian provinces in WCI and the Midwest Group as well as their contributions to emissions).  WCI: Western Climate Initiative; Midwest Group: the Accord; RGGI: Regional Greenhouse Gas Initiative.  MtCO₂e: Millions of metric tonnes of greenhouse gas emissions expressed in terms of carbon dioxide-equivalent greenhouse activity.  Percents are the portions of total U. S. emissions.  

Source: World Resources Institute (http://www.wri.org/stories/2007/11/midwest-greenhouse-gas-accord-numbers)

RGGI incorporates the ten states of Maine, New Hampshire, Vermont, Rhode Island Massachusetts, Connecticut, New York, New Jersey, Delaware, and Maryland.  The notion of setting up this regime began with Gov. George Pataki of New York.  In 2003, he wrote the governors of 11 other states in the Northeast proposing to limit greenhouse gas emissions.  He recognized the success of cap-and-trade in combating the sulfur emissions from Midwest power plants that cause acid rain, and identified under the U. S. Clean Air Act.  

RGGI was formalized in July 2007 by the establishment of the nonprofit corporation RGGI, Inc., whose role is to coordinate and oversee the administration of the Initiative.  As with the other two accords, it is up to the individual states to enact the enabling laws for operation of the Initiative in the respective states.  A Memorandum of Understanding (MOU) among the member states was initially issued in December 2005 by seven of the ten states.  The remaining three joined by early 2007.  As such, RGGI is the first of the three regional greenhouse gas accords currently operating in the U. S.

The MOU recognizes that global warming due to man-made greenhouse gases is occurring, and that the resulting increase in average global temperature has negative effects on the states involved, including more severe droughts and floods, changes in forest composition, and increasingly damaging storm surges along the coast.  It also recognizes that reducing the need for imported fossil fuels will enhance energy security and will lead to development of new industries related to renewable and sustainable energy sources.

Contrary to the WCI and MGGRA which cover all major activities that produce greenhouse gases, the RGGI accord agreed on controls only for fossil fuels used in electric power generation, affecting facilities with greater than 25 megawatts (MW) generating capacity.  It covers 209 facilities across the region.  The member states agreed to create a CO2 Budget Trading Program within the region, with the goal of stabilizing and then reducing the overall emissions from this source.  Each state’s base emission amount was established at the outset, totaling 188 million tons of CO2, and is to remain fixed at that level from 2009 through 2014.  The emissions limits are implemented by selling emission allowances, where 1 allowance covers 1 ton of CO2 emissions.  Starting in 2015, the allowances for each state are to be reduced by 2.5% per year, so that by 2018 the emissions will be 10% below the starting level.  The Trading Program is in fact a cap-and-trade regime, in which the allowances are tradable in an auction market.  The auctions occur quarterly.  They ensure fair pricing of the right to emit greenhouse gases on an open market available to all parties.  RGGI estimates that the auction price increases the cost of electricity to the consumer by only 0.4% to 1%.

The MOU also allows for offsets that serve as substitutes for actual reductions of CO2 emissions from a particular source.  Instead of achieving reductions in emissions at an emitting site, the source may use a limited part of its CO2 allowances to purchase offsets from remote facilities that accomplish reductions of emissions or new increases in CO2 removal from activities such as afforestation.  Initially the offset facilities must be within the region covered by the Initiative, but can be expanded to be anywhere in North America.  Allowances granted are biased to favor using offsets within the region.

Each RGGI state uses two thirds of the proceeds from the sale of allowances to promote activities that contribute to further reduction in greenhouse gas emissions.  These include subsidizing energy conservation activities and promoting renewable energy industries.

The RGGI model presents itself as serving as an example for a) a functioning cap-and-trade regime, b) a program that will reduce greenhouse gas emissions from fossil fuels, and c) identifying and promoting new ventures developing renewable energy sources and conservation.   As the oldest regional accord in the U. S., RGGI should serve as an example for the other regional greenhouse gas reduction accords, as well as for any federal regime that may emerge directed toward reducing greenhouse gas emissions.

Political Environment and Practical Results.  RGGI is the first regional initiative in the U. S. set in place to combat greenhouse gas emissions that cause global warming; as noted, it uses a cap-and-trade system to achieve its objectives.  Political supporters of such programs point out that the revenues received from allowances should be considerable, and will support development of new businesses and creation of new jobs.  Enterprises involved in energy conservation, and the development and installation of renewable energy sources, benefit from investment of these public funds in their activities.  Opponents of such programs, and especially cap-and-trade regimes, point out that consumers wind up paying the extra costs to cover the expense of buying allowances.  This extra expense, they argue, inhibits job growth and enterprise creation, leading to exporting jobs elsewhere.

These considerations, and others, have led to the failure to impose greenhouse gas restrictions at the federal level in the U. S.  It is reported, however, that as of December 2010 RGGI has been a success in most of the states covered by RGGI.  Nine auctions have been held, garnering $729 million.  The auctions have proceeded without problems, contrary to the early experiences of the European Union’s Emission Trading Scheme.  In New York, for example, every dollar spent promoting renewable energy spawns six dollars of overall new economic activity.  RGGI states have created hundreds to thousands of new jobs from these funds.  This modest success in RGGI (based on power plant sources only) suggests that the two other, newer, greenhouse gas initiatives, WCI and MGGRA, should also have positive effects.

Unfortunately, positive revenue balances in government accounts are always susceptible to attack.  In the present economic environment in which most U. S. states have severe budgetary deficits, such reservoirs look very attractive.  It is reported that Gov. Chris Christie of New Jersey has diverted $65 million from RGGI revenues for general expenditures.  In Connecticut former Gov. Jodi Rell likewise diverted ratepayer funds for the energy Efficiency Fund; currently some may be restored (email from Clean Water Action). 

RGGI Leads the Way toward Stabilizing the World’s Atmospheric CO2 “Bathtub”.  The modest reductions in the emissions of greenhouse gases under RGGI are first steps toward achieving a leveling off of the atmospheric CO2 concentration.  Much more needs to be done, however. The global atmosphere, and its CO2 component, can be thought of as a "bathtub", having a "faucet" that adds new CO2, and a "drain" that removes CO2.  The present amount of CO2, about 390 parts per million (ppm), is already higher than in the past several thousand years, and the highest since the start of the industrial revolution.  The”faucet”, including increased burning of fossil fuels worldwide, is adding about 2 ppm CO2 each year; the “bathtub” is getting fuller.  (There are fewer balancing activities that “drain” CO2 and other greenhouse gases from the atmospheric “bathtub”.)  The stronger greenhouse effect from this CO2 leads to higher overall, long-term, global temperatures, which are also higher than in the past. 

Thus it is imperative not merely to reduce the rate of adding new greenhouse gases to the atmospheric “bathtub”, but rather to achieve zero world-wide emissions as soon as practically possible. 

References:

RGGI Fact Sheet http://www.rggi.org/docs/RGGI_Fact_Sheet.pdf.

RGGI CO2 Allowance Tracking System http://www.rggi.org/docs/RGGI_COATS_in_Brief.pdf

© 2011 Henry Auer