Chesapeake PSR

Introducing RGGI (Pronounced "Reggie")

Climate Change and EnergyLydia SullivanComment

by Sara Via, PhD

The Regional Greenhouse Gas Initiative (RGGI) is a cap and trade program that has been reducing carbon pollution since 2009 across a consortium of nine states in the Northeast, including Maryland.

RGGI works by charging power generators for the privilege to pollute – one “allowance” must be bought at auction for every ton of CO2 they plan to emit. If a power plant has good pollution control and doesn't emit much, the owners don't have to buy as many allowances. Unused allowances can be banked for future use, traded to companies with dirtier plants or sold on the open market. The money from the auctions is returned to the states to invest in programs that benefit consumers and reduce electric demand through energy efficiency or installation of clean energy. Emissions are reduced, consumers and the states benefit through reduced energy costs and local investments – everybody wins.

According to a 2015 report from The Analysis Group, proceeds of RGGI auctions returned $2.3 billion to the nine member states and created over 20,000 jobs from 2009-2014. Moreover, consumers in RGGI states have saved $460 million on their electric bills. RGGI has clearly shown that reducing emissions doesn’t harm the economy.

RGGI is one of only three regional cap and trade programs in North America. British Columbia, Canada was first to initiate a carbon pricing program in 2008, and it is extremely popular. The BC program involves a tax on all products that cause carbon emissions, whether through electricity generation, transportation or home heating. Canadians call this a “carbon shift” tax, because it shifts the cost of the economic and health damages caused by CO2 and other co-pollutants from taxpayers in general to the biggest users of fossil fuels. Use less, pay less. The BC experiment has been resoundingly successful. Results in the first five years show that the economy of BC has increased faster than that of the rest of Canada. In BC, the 10 percent reduction in greenhouse gas emissions from 2008-2013 traces to a 17.3 percent reduction in the use of fossil fuels during that time period (Canada as a whole increased fossil fuel use by 1.5 percent).

California started the third carbon pricing program in North America in 2011, adding Quebec, Canada as a trading partner in 2013. California’s program produces greater emissions reductions than RGGI because it covers carbon emitted through transportation as well as from the electric sector. Governor Jerry Brown has recently directed that allowable emissions decline annually in a way that will reduce emissions 40 percent by 2030. This long-term commitment to the emissions trajectory is useful to the power industry because it removes the considerable market uncertainty caused by evaluating the magnitude of emissions reductions every few years.

RGGI is currently undergoing a program review to determine how it will run in the future. One of the most important decisions made after this review will be how much (if at all) the cap on allowed CO2 emissions should be reduced each year. Currently, the cap is reduced annually by 2.5 percent of that year’s emissions, and no more cap reductions are scheduled after 2020. This plan is in dramatic conflict with the emissions goals of each of the RGGI states, which each have announced that they want to reduce carbon emissions by 35-40 percent by 2030 and 80-90 percent by 2050. These pollution reduction goals certainly will not be met unless the cap on allowances is reduced annually, and modeling suggests that the cap reduction needs to be at least five percent each year.   

Next month, I’ll discuss some of the details of the controversy about the cap reduction. I’ll also describe how adding changes in home heating, transportation, energy efficiency and the use of wind and solar to the RGGI’s achievements can propel us to the clean energy future we want.

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Dr. Sara Via is Professor of Biology and Entomology at the University of Maryland, College Park. She is co-lead on Chesapeake PSR's Climate Health Action Team.