RGGI Cap & Trade Program in U.S. to Tighten Caps

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Success in lowering emissions in the RGGI states has resulted in talk of tightening the pollution limits to further reduce greenhouse gases.

In January, six of the nine participating states – Massachusetts, Connecticut, Vermont, New York, Delaware and Rhode Island – announced they will permanently eliminate 72 percent of the unsold carbon allowances.

Originally, ten Northeast and Mid-Atlantic states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont set up RGGI.Only New Jersey, under pressure from the Koch brothers, pulled out.  The longer that RGGI’s cap & trade has been the target of the Koch Brothers, the more popular it has become.

Chris Christie; New Jersey’s Republican Governor pulled out, quoting the Koch brothers that cap & trade was not effective, after raiding the auction fund of $65 million through June 2011, to cut the state deficit. But New Jersey has been the only state to bail. New York also temporarily raided 31.8 percent and New Hampshire, 11 percent, of their pollution auction funds, to cut state budget deficits.

New York and New Hampshire both have governors who are solidly committed to staying in, though New Hampshire’s Tea Party House installed by the Koch brothers attempted an exit last year.

Delaware also easily defeated a Koch-inspired attempt to exit RGGI.

When the caps on emitted greenhouse gases were set in 2005 by the Regional Greenhouse Gas Initiative, or RGGI, the caps were set fairly generously (188 million tons of carbon per year) because reductions in greenhouse gases appeared to be very difficult, and they wanted to ease into the program. But the cap & trade program has not just met its goal of greenhouse gas reduction, but exceeded it.

It is time to further tighten the limits, say energy experts.

The elimination of almost three quarters of the outstanding carbon permits will prevent energy suppliers from stockpiling allowances for future years  (eliminating the incentive for further greenhouse gas reductions.)

The program has succeeded, not just in reducing the region’s greenhouse gases, but by generating the funds needed to do so with what amounts to pollution fees. The auction funds have paid for efficiency improvements for businesses in all of these states, increasing their state GDP, cutting energy costs and greenhouse gas emissions. RGGI works, according to a new, independent review of RGGI by the Analysis Group.

“The region as a whole, according to a report that was done, will enjoy a $1.6 billion net economic benefit [thanks] to RGGI” said Ken Kimmell, Commissioner of the Massachusetts Department of Environmental Protection. “In addition we have created jobs and we have kept money local rather than going to coal or to gas or overseas.”

Through the end of 2010 – state totals from the auctions ranged from $282,272,683 for New York, $147,530,363 for Maryland and $123,229,478 for Massachusetts to $5,701,535 for tiny Vermont. New Jersey would have been number two after New York, but because Christie pulled out, its total was just $102,223,63.

According to the 2011 RGGI Allowance Proceeds (pdf) – that features stories from each state about retrofits for specific businesses, non-profits and homes to lower energy costs – about half (52 percent) of the auction proceeds have been spent on “the low-hanging fruit” of energy efficiency measures that reduce energy consumption.

It typically costs about 2.5 cents to save a kilowatt-hour of electricity though energy efficiency, and between 6 and 15 cents to generate a kilowatt-hour from conventional generation sources, so saving energy is cheaper for these state than buying power, but it takes an investment to do so, even though for each dollar invested, there are $3-$4 in savings. The auctions provide the funding for the upfront investments needed in energy efficiency.

The efficiency funds were spent on

Home weatherization and retrofitting
Incentives for energy-efficient appliances
Energy efficiency retrofits for small businesses
Educational programs for businesses and consumers
Large-scale commercial and industrial energy efficiency projects
Combined heat and power projects
Municipal clean energy projects
Energy sector occupational training programs

Although front groups funded by oil billionaires David and Charles Koch claim that RGGI has increased energy costs and burdened the economy, the opposite is true.

In New York alone, among other benefits, auction proceeds have saved New York residents $4.6 million in energy costs.

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