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Regional Greenhouse Gas Initiative (RGGI)

Overview | History | New Jersey | New Jersey Costs | Studies | Senator Bateman

Overview:
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.
These nine states agreed to cap and reduce their electrical energy sector's greenhouse gas emissions by 10% by 2018.
Note: Electricity is the biggest source of energy consumption in the US accounting for 40% . See energy stats.

RGGI is a cap and trade program. Under the initiative, electric power plant operators buy credits at quarterly auctions for the carbon dioxide they emit. Proceeds are then to be used to pay for renewable energy initiatives and promote conservation, although some states have used some of the money to balance the overall budget. The program had raised more than $950 million in the ten states from Sept. 2008 through March 2012."

Cap and Trade:

  • The cap is a limit on the amount of pollution that can be released, measured in billions of tons of carbon dioxide (or equivalent) per year.
  • Companies which burn fossil fuels to produce energy buy carbon allowances thru auctions.
  • If a company is able to cut its pollution easily and cheaply, it can end up with extra allowances. It can then sell its extra allowances to other companies.
  • On the other hand, some companies might have trouble reducing their emissions, or want to make longer-term investments instead of quick changes. Trading allowances gives these companies another option for how to meet each year's cap.
Power sector CO2 emissions are capped at 188 million short tons per year through 2014. The cap will then be reduced by 2.5 percent in each of the four years 2015 through 2018, for a total reduction of 10 percent.

History:
In 2003 George Pataki, then Governor of New York, sent a letter to the governors of Northeastern and Mid-Atlantic states seeking "to develop a strategy that will help the region lead the nation in the effort to fight global climate change.

As of Dec. 2005 seven states were involved.
Massachusetts Governor Mitt Romney objected to a lack of opt-out provisions if energy prices exceeded a certain threshold. He went on to attack Senator John McCain for his positive position on cap-and-trade during the 2008 presidential election.
Massachusetts rejoined on January 18, 2007, on the order of newly elected Governor Deval Patrick.

New Hampshire joined on June 12, 2008, bringing the total to 10 states.

Emission permit auctioning began in September 2008, and the first three-year compliance period began on January 1, 2009.

There have been 13 auctions from Sept. 2008 to March 2012 raising $952 million. The amount collected has been declining as demand for carbon allowances declines.

       Total   NJ (approximate)
2009   $349 M   $67
2010   $283 M   $33
2011   $174 M   $13
New Jersey:
New Jersey was a member, but in May of 2011 Governor Christie pulled the state out. He acknowledged the effects humans are having on climate change but said, "The whole system is not working as it was intended to work. It's a failure."

Christie vetoed a bill in August, 2011 that would have required NJ to remain in RGGI.

New Jersey collected $113 million over the period. It will be allowed to retain $102 million after it pulls out in 2012.

In March of 2012 the NJ Senate passed another bill which would require the state to remain a member of the Regional Greenhouse Gas Initiative.
As of April the bill was under debate in the assembly.
It is questionable whether there are enough votes to override another veto if it passes.

How much will it cost?
Conservatives quote Obama in a 2008 campaign interview with the San Francisco Chronicle saying "Under my plan of a cap and trade system, electricity rates would necessarily skyrocket."

The climate debate has changed significantly since then.
Republicans say each household will pay $3,100 a year, a figure they came up with based upon a 2009 MIT study. The author of the MIT study had told them it was wrong. And in an April 1 letter to House Republicans, authors of the MIT study said that the report was being misinterpreted; by their count, estimates hover closer to $340 per family.
A 2011 study by the Analysis Group (see below), says RGGI only increased consumers' bills by an average of 0.7% over the last 3 years.

How this will affect electricity rates depends on how the auction revenues are spent. A 2008 study in NH says if revenues were returned to utility customers, The average PSNH residential customer could expect to pay $0.26 more per month in 2009 and $1.30 in 2018.

New Jersey Costs
Because 60% of NJ electricity is nuclear generated and only 2.7% is coal, it does not need as many energy credits, so has a lower cost.
See NJ Electricity

In New Jersey:
(Note: The following are ball park numbers, I couldn't find exact counts)
Average of $38 million per year collected in NJ from RGGI auctions in 2009-2011
3.1 million Residential customers 
0.8 million commercial customers
Residential customers constitute 40% of electrical revenues, commercial the rest.

41¢ per month per residential customer
$2.37 average per month per commercial customer
  Small businesses would be less than $1 per month

This is slightly less than the 0.7% per month in the Analysis Group study (see below).

Electric customers
2.2 million Public Service Electric and Gas Co. (PSE&G) 
1   M       Jersey Central Power & Light Company (JCP&L)
0.5 M       Atlantic City Electric (ACE)
0.07M       Rockland Electric Company (RECO)
Source: BGS Auction
Studies
The Feb. 2012 report Stop The Clean Air Rollback, by the Environment New Jersey Research and Policy Center quotes the Analysis Group study (below) saying "RGGI will lead to average energy savings of $25 per residential customer across the Northeast" due to energy consumption reductions funded by RGGI.

A 2011 Nature Conservancy article, says,
"Since RGGI was enacted, over $35 million has been invested directly into New Jersey businesses for efficient and renewable energy projects. These investments are projected to result in savings of over $90 million to consumers in New Jersey."

A Nov. 2011 "New Analysis Quantifies Economic Impact of Regional Greenhouse Gas Initiative in Ten States" by the Analysis Group had the following key findings::

  • The regional economy gains more than $1.6 billion in economic value added (reflecting the difference between total revenues in the overall economy, less the cost to produce goods and services)
  • Customers save nearly $1.1 billion on electricity bills, and an additional $174 million on natural gas and heating oil bills, for a total of $1.3 billion in savings over the next decade through installation of energy efficiency measures using funding from RGGI auction proceeds to date
  • 16,000 jobs are created region wide
  • Reduced demand for fossil fuels keeps more than $765 million in the local economy
  • Power plant owners experience $1.6 billion in lower revenue over time, although they overall had higher revenues than costs as a result of RGGI during the 2009-2011 period

In the report "The Economic Impacts of the Regional Greenhouse Gas Initiative" they say
"The study found that, although the cost of the allowances was largely passed along to consumers, RGGI only increased consumers' bills by an average of 0.7% over the last 3 years."

"The scope of RGGI's positive economic benefits varies by state and region, in large part because the states spent the RGGI allowance proceeds differently. Different expenditures have different multiplier effects in their economies and different impacts on their electric systems. For example, a state's use of RGGI dollars to reduce energy use in the electric sector lightened the earlyyears' cost impact for electricity consumers by turning the RGGI program into a down payment on lower overall bills for electricity in the longer-term. The New England states, for example, spent much of their RGGI dollars on energy efficiency programs, and so New England's electric system realizes overall benefits from RGGI, even before looking at the macroeconomic impacts. In the other regions, use of RGGI dollars to pay for general-taxpayer-funded programs ends up transferring dollars from the electric system to the other sectors of the economy. The gains in the larger economy (from re-circulating RGGI auction proceeds broadly) offset the negative impacts in the electric sector in these other RGGI states (New York, New Jersey, Delaware, and Maryland (in PJM)).

Americans for Prosperity attack Senator Bateman
Senator Kip Bateman, Republican in the 16th district, broke ranks with fellow republicans and voted to rejoin RGGI.

Shortly thereafter the Americans for Prosperity (AFP) a political advocacy group set up and managed by the Koch brothers, sent out a brochure asking people to call State Senator Bateman because of his support for RGGI.
It states that Cap and Trade will cause "Higher Taxes, Lost Jobs and Less Freedom" and includes Obama's 2008 campaign interview mentioned above.

The Raritan Valley Group sent Senator Bateman a Letter thanking him for his support.

Jeff Tittle, Sierra Club NJ Chapter director, said,
"Kip Bateman was the one republican to vote for RGGI. It took a lot of courage especially with pressure from Governor Christie, the Tea Party and Koch brothers. Kip Bateman stood up for the environment and green jobs in New Jersey despite heavy pressure. American for Prosperity have been doing robo calls, emails, and mailers in his district to pressure Kip Bateman, who showed he is a true environmental champion,"

Dan Aronson, Associate Professor of Economics at the Raritan Valley Community College and former Raritan Valley Group ExComm member wrote a letter to the editor praising Bateman.

Terms:

ACE - Atlantic City Electric 
ARP - Acid Rain Program
BPU - Board of Public Utilities 
DEP New Jersey Department of Environmental Protection
CAP - Carbon Abatement Program 
CAP & Trade - An environmental policy tool to reduce carbon emissions. see above.
CARB - California Air Resources Board
Carbon offsets - Allow companies to fund projects that reduce greenhouse gas (GHG)
   emissions anywhere in the world to offset reductions that are too expensive 
   for you to  make in your own systems.
ENE - Environmental Northeast
ECG - Electric Customers Group
EPA - U.S. Environmental Protection Agency
FERC Federal Energy Regulatory Commission 
JCP&L - Jersey Central Power and Light
NJDEP - NJ Department of Environmental Protection
PJM - Pennsylvania-New Jersey-Maryland Interconnection - 
     A regional transmission organizations (RTO) coordinating the movement of power
     through the transmission network across and within its region and
     reporting to the Federal Energy Regulatory Commission (FERC).
PSE&G - Public Service Electric and Gas
RAC - Remediation Adjustment Clause for cleaning up polluted Sites
RECO - Orange & Rockland Utilities
RTO - Regional Transmission Organization e.g. PJM
SBC - Societal Benefits Charge - A charge on your utility bill to fund programs such as,
   Low income programs, nuclear decommissioning,  energy efficiency
   and renewable energy programs, RAC 

See Also:
NJ Electricity
Regional Greenhouse Gas Initiative (RGGI.org)
  Benefits
Regional Greenhouse Gas Initiative (RGGI) CO2 Budget Trading Program - Auction Results
Regional Greenhouse Gas Initiative Good for Garden State | The Nature Conservancy
New Jersey study says taxing plants for carbon emissions creates jobs - Philly.com Feb, 2012
The Environment New Jersey Research and Policy Center Reports:
  Stop The Clean Air Rollback, Feb. 2012
  A Record of Leadership How Northeastern States are Cutting Global Warming Pollution and Building a Clean Economy, Apr. 2012
New Jersey needs RGGI | NJ.com - OpEd from The League of Women Voters
Mar, 2012
Analysis Group | New Analysis Quantifies Economic Impact of Regional Greenhouse Gas Initiative in Ten States Nov. 2011
cap and trade at New Jersey Watchdog
Cap-and-trade: Regional approach to reduce greenhouse gas emissions works - baltimoresun.com
RGGI Emissions Trends from Environment Northeast (ENE) Jan., 2011
BeyondCoal_NEReport @ SierraClub.org
Foundation for Fesponsible Technology (FFRT) = Rggi Faq
Diverse Coalition Calls On Administration To Freeze PSE&G's Utility Rates
Big N.J. energy users ask state to reduce their share of costs for green energy programs - NorthJersey.com
Carbon Abatement Program (CAP) Maintaining the Integrity of the RGGI Cap

Updates:
4 May, 2012
Changed: Remediation Adjustment Clause for cleaning up polluted Sights
To: Remediation Adjustment Clause for cleaning up polluted Sites