Record CO2 Reduction in US Cap & Trade States

January 24th, 2012 by Susan Kraemer

In yet another resounding success for cap & trade policies, today carbon dioxide pollution capped by the 10 participating RGGI states of the US Northeast has been reduced to its all-time low of a mere 124 million short tons.

Power plant CO2 emissions in the states that participate in the Regional Greenhouse Gas Initiative (RGGI) cap & trade dropped 34% below the cap in 2011, according to a new report from Environment Northeast, at Point Carbon News.

So… are they cowering in caves, like Rush Limbaugh says?

Nope. They switched to clean sources of energy. New Jersey now beats California in solar power. (Republican governor Chris Christie exited RGGI this year under pressure from the Koch brothers, but the switch was largely made already, leading to sizable drops in emissions in 2011, compared with 2005.)

RGGI auction proceeds of $440 million over the past three years – funds collected from polluters – were used to reinvest in energy efficiency subsidies which kept power consumption stable, the report said.

(Before exiting RGGI, saying cap & trade doesn’t work, Christie raided the RGGI pot of $65.2 million for non energy-related investments, so New Jersey was robbed of its benefits of cap & trade. If the money is not reinvested in clean energy production, indeed, cap & trade would not “work” as well to reduce emissions. But Christie’s raid was not widely copied.)

The New Hampshire Republican House also bowed to the mighty Koch brothers (New Hampshire Vote to Exit RGGI ) but were thwarted by the state’s Democratic governor. The most recent quarterly auction yielded $17 million for the state’s clean energy investments.

What made up the shortfall as they dumped dirty power?

Increased output from non-emitting sources like wind power contributed to the decline in emissions to their lowest level since the cap-and-trade program began in 2009, said the report.

Additional auction proceeds have been invested in a variety of locally effective energy subsidies in many of the (now 9) RGGI states, ranging from substituting solar panels at home to funding for insulation retrofits, geothermal heating, or bio-energy.

In 2011, natural gas generation increased across the 10 participating northeastern states by 5 percent from 2010 levels and 34 percent from 2005 levels, according to the report.

With increased precipitation, existing hydro power was also up, along with an increase in output from existing nuclear plants. Overall energy production increased 2.4%, with no “leakage” to dirty power in neighboring states.

Can they keep up this record?

Yes. New low carbon energy programs and efficiency investments will help keep CO2 emissions down in the future, the report said, even when the economy recovers.

With the overshoot of the mark, RGGI officials are conducting a review of the program this year that could lead to a tightening of the emissions cap.

Like the European Commissions’ cap & trade program – which is also considering a more ambitious goal of 30% carbon reduction by 2020, because it too has easily overshot its targets – RGGI now has very low carbon prices, and an oversupply of permits in the market. Both programs are considering raising the minimum bid, RGGI up to $1.93 per ton of CO2, and the EU to about $9 a ton.

But note that even though the price drops when a goal is easily achieved, price volatility does not hamper the result. A 34% reduction even below the target is stupendously successful. Cap & trade really works to get climate-destabilizing carbon emissions down.

(Previous: Cap and Trade Dead?? Carbon Under 8 Euros!!)

Under a cap & trade program, there is no certainty as to prices, but there is certainty of emissions reductions, because there is a cap, or limit on pollution, and it gets ratcheted down each year: Five Good Things Cap-and-Trade Has Done for You.

By contrast, under a carbon tax, there is certainty of price, but no limit on pollution (at least for those rich enough not to be deterred by a high price!)

So – if you want to absolutely limit and reduce pollution, cap & trade will do it.

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Tags: cap & trade, nj, RGGI, succeeded, success

About the Author

Susan Kraemer writes at CleanTechnica, CSP-Today, PV-Insider , SmartGridUpdate, and GreenProphet. She has also been published at Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times. Follow Susan on Twitter @dotcommodity.

Jake

Actually, a tax (price mechanism) will do the same as a cap (quantity mechanism) theoretically—and your statement that a low tax may not deter rich consumers is true for cap-n-trade if the cap is too lax. Profitable firms will just purchase cheap excess permits and continue to produce at high levels, where on the other hand if a tax higher than the trading permit price existed and was lower than marginal production costs, the tax would achieve better reduction levels. It’s sort of a silly way to denigrate a tax mechanism merely because the RGGI cap system has worked. They are equally effective if done right so why perpetuate unnecessary biases.

The rich may not have “limits” as you suggest, but in aggregate a price necessarily has a corresponding quantity “cap”.
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