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Regional Greenhouse Gas Initiative - Issue Summary

Have you heard of RGGI?

Issue Facts:

By: George Gantz

Global climate change is arguably the biggest and most difficult environmental challenge of the 21st century - the outcome may determine the ecology and climate of the Earth for millennia. The problem is big and the suggested solutions complex, potentially involving geo-political cooperation of unprecedented scale and technical/economic transformations affecting the way of life of every human being on the planet.

On the other hand, there are those who dispute the science, or the accuracy of the climate predictions, or the root causes of observed climate change, or the need for immediate action, or the types of action needed, or whether any action will do any good …

Assuming there is a problem, how do you even begin to address it? In New Hampshire, the approach is a four letter word - RGGI, the Regional Greenhouse Gas Initiative, the first cap-and-trade program for greenhouse gases in the U.S. RGGI (www.RGGI.org) is an agreement among 9* Northeastern and mid-Atlantic states to reduce global greenhouse gases. In New Hampshire, enabling legislation was passed in 2007.

The concept of “cap-and-trade” is simple: The government creates a limited pool of carbon dioxide (CO2) emission allowances. Major emitters of greenhouse gases (i.e. the several substances that are responsible for global climate change, primarily carbon dioxide) must use the allowances to cover their emissions. Over time, the government reduces the quantity of those allowances which will drive up the price and force polluters to find efficient, low-cost ways of reducing carbon emissions. The long-term goal - reduce greenhouse gas emissions significantly over time through measures that impose the lowest total cost on society.

Most current cap-and-trade programs and proposals, including RGGI, require emitters to purchase a significant portion of their allowances through an auction, instead of having them issued pro-rata to existing emitters. Allowances can also be bought and sold on the secondary market, providing an opportunity for companies that efficiently reduce their emissions to sell excess allowances, potentially for a profit. Auctioning allowances provides revenues which can be used to jump-start the transition of our energy system by funding energy efficiency measures and clean energy development.

The money that the power companies pay for the allowances comes from increased electric rates to consumers (businesses and individuals). In the run-up to RGGI, studies indicated the rate increase over time would be in the range of 2%, or $2 per month on the bill for a typical residential customer using 500 KWH. Larger users will pay more.

Here’s how RGGI works in NH:

The five power producers in NH must purchase 1 allowance for every ton of CO2 emitted. These allowances can be purchased at quarterly auctions or on the secondary market via futures and options contracts or over-the-counter (RGGI Quarterly Auctions Fact Sheet). The quarterly auctions, held by RGGI, cover all 9 states and the proceeds are divided between them. RGGI compliance occurs in three-year control periods. 

At the end of each control period, each regulated power plant must submit one CO2 allowance for each ton of CO2 emitted over the preceding three years. The first control period extended from 2009 - 2011. The second control period began on January 1, 2012, and extends through December 31, 2014.

Money generated from CO2 allowances is deposited into the state’s Greenhouse Gas Emissions Reductions Fund, which is administered by the Public Utilities Commission (PUC). The state law requires that the fund support energy efficiency, conservation and demand response programs, and that at least 10 percent be used to assist low income residential customers to reduce total energy use.

New Hampshire has collected $33 million in revenue since joining the program in 2008. An independent report claims RGGI boosted the state's economy by $17 million and created 458 jobs. The program has added 46 cents to the average customer's monthly bill.

One of the goals of RGGI is to encourage the power plants to emit less CO2. Coal and oil burning plants (3 of the 5 plants in NH) have more of a challenge as these fuels emit more CO2 than natural gas (the other 2 plants). In addition to finding ways to clean up their CO2 emissions, plants can explore capture and sequestration which involves storing their CO2 (difficult to execute in the North East), and offsets, in which the plants invest in CO2 reducing or absorbing projects such as planting trees. Offset credits may be used in place of allowances to meet up to 3.3% of a plants CO2 emissions.

Legislative update: 

RGGI is seeking to lower the cap on carbon dioxide emissions from the current 165 million tons to 91 million tons in 2014. The cap would be lowered an additional 2.5 percent per year from 2015 to 2020. Each state must ratify the new changes.

HB 1490 became law in June 2012. It implements the following changes:

This bill replaces the greenhouse gas emission reduction fund with the energy efficiency fund, calls for rebates to electric power ratepayers, and allocates the remaining proceeds received by the state from the sale of allowances to core energy efficiency programs funded by system benefits charges. The bill also requires the legislative oversight committee on electric utility restructuring to monitor and report on certain core energy efficiency programs. 

The bill contains a contingent repeal of New Hampshire’s regional greenhouse gas initiative cap and trade program if 2 or more New England states withdraw or agree to withdraw from participating in the initiative or if a state which has at least 10 percent of the total load of the New England states participating in the initiative withdraws or authorizes withdrawal from participation in the initiative.


Rep. Richard Barry (R-Merrimack) is sponsoring HB 630, originally a 2013 bill to repeal RGGI.  HB 630 was written in Committee and now aims to dedicate more RGGI proceeds to the low-income core energy efficiency program.  Sen. Nancy Stiles (R-Hampton) is sponsoring SB 123, a bill that would give more RGGI funds to municipalities.  Rep. Rappaport (R-Colebrook) is sponsoring HB 306, a bill to lower the cap on carbon emissions and therefore raise the price of allowances.  Lastly, Sen. Martha Fuller Clark (D-Portmsouth) is sponsoring SB 66, a bill that asks the department of environmental services and the public utilities commission to analyze the current system for allowance prices.

*New Jersey withdrew from the initiative in 2011.

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Pros

Pro Issue Opinion by LFDA Editor, RGGI is worth the costs:

 

RGGI benefits consumers, including low-income ones:

  • The NH share of the net proceeds of the RGGI auction will be reinvested in energy conservation.  Studies show that over time the benefits of this reinvestment to consumers will outweigh the costs of increased electricity bills.  
  • New Hampshire and some other RGGI states are using auction revenue to support weatherization and home heating assistance for low-income consumers, programs that are historically underfunded.
  • The energy efficiency programs, including those funded using RGGI auction revenues, typically provide grants, rebates, or low-interest loans to consumers for undertaking energy efficiency improvements. These incentives are designed to reduce the upfront costs associated with efficiency projects and decrease the payback period. 

RGGI investments are good for businesses and well create jobs:

  • Investing in energy efficiency and clean energy can attract green companies to New Hampshire and the RGGI region, positioning both to be leaders in the transition to a clean energy economy.
  • Grants handed out by the PUC, directed towards commercial and industrial consumers will help cut costs and help them to remain competitive over the long-term.
  • The dedicated funding stream provided by RGGI auction revenue ensures continued investment in industries that will benefit New Hampshire in the long-term, even as state budgets face dramatic cuts that threaten other programs. 

Selling allowances, rather than giving them away, is the right way to go:

  • Opponents of auctions argue that allocating allowances freely rather than having utilities pay for them would prevent emitters from being forced to pass the cost of allowances through to consumers. This is not the case. Regardless of whether allowances are auctioned or given away for free, each allowance has an opportunity cost – essentially the cost not selling that allowance on the open market. In general, these costs are passed along to consumers. If the allowances are allocated for free, the entities who receive them may actually earn windfall profits since they are not required to pay for the allowances and still raise prices. This is the situation that occurred in Europe when a cap-and-trade was first introduced. By auctioning allowances, raising revenues, and then reinvesting that revenue to boost clean energy and energy efficiency, a cap-and-trade program can both reduce emissions and ensure long-term benefits for consumers. 

RGGI benefits our citizens and the world:

  • Taking this first step with RGGI will push the nation, and ultimately the world, towards a carbon reduction program. Somebody has to start somewhere.
  • By investing in energy efficiency and renewable energy, New Hampshire and the other RGGI states will reduce their dependence on fossil fuels, which are subject to price volatility, potentially saving money for residents and business in the future.
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Cons

Con Issue Opinion by LFDA Editor, RGGI is not worth the cost:

 

RGGI has damaged New Hampshire economically and competitively:

  • Higher energy costs in N.H. has damaged the state’s competitive position. It will deter business investments and hence affect incomes and jobs throughout the state.
  • Electric rates have gone up as a result of RGGI (latest study shows 46-cents per month increase). The impacts will also vary as the price of the  allowances varies, but this can be expected to increase over time as allowance prices increase. The specific effects are buried in the general costs of energy in the market and are different for each utility.

RGGI was unnecessary:

  • The same energy efficiency benefits that may be enabled by RGGI could have been achieved without RGGI - simply by increasing the System Benefit Charge rates and reinvesting that money in energy efficiency.

RGGI will not meet its goal:

  • RGGI increases costs of energy production within the region - but has no effect outside the region.  This may result in pushing energy production or economic activity to other regions which use more polluting fuels, thereby undermining any carbon reduction benefits from the program.

RGGI is premature and not correctly formulated:

  • The secondary market for carbon credits in RGGI is not regulated. There are concerns that speculators will get involved, increasing market volatility, and siphoning off profits that will drive costs up to consumers. There are reports that some traders have gotten rich in the European carbon credit market - and there have been problems with volatile prices.
  • It is not clear what happens to RGGI if and when the federal government implements a national approach to carbon reduction — something which is being debated in Congress at this moment. Why should NH citizens bear the costs of cap-and-trade while the 40 nonparticipating states have a free ride.
  • There is disagreement among scientists as to whether controlling CO2 emission is the answer to global warming — we are now paying for a debatable scientific theory.

This is taxation without representation:

  • New Hampshire citizens have been subjected to a cost increase in their utility bills through legislative action—this seems like a tax increase that was never disclosed or voted on by the public.

RGGI revenues are being misspent:

  • The revenues for RGGI are being used for the wrong purpose. They should be passed on to consumers or used to reduce taxes. An economic study by UNH professor Dr. Ross Gittell, concluded that by 2015, the overall economic impact would be positive if 100% if the RGGI auction revenue were used to reduce business taxes. Using RGGI auction revenue in this way would increase the state’s economy by $78M and add 884 jobs, mostly in construction and services.
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Regional Greenhouse Gas Initiative Member Posts
Take Action

If you are interested in RGGI and want to take action here are some choices:

  • If you are new to contacting your government, please visit our page on How to Take Action.
  • Contact one of the organizations listed in Learn More. These groups represent the pro or con positions of issues.
  • Contact a government official as follows:

1. Contact members of the New Hampshire House of Representatives or the New Hampshire Senate.

2. Contact the Committee chairperson or members of the House Science, Technology and Energy Committee or the Senate Energy and Natural Resources Committee – these are the committees that oversee this issue.

3. Contact the head of the Public Utilities Commission.

4. Give your opinion to Governor Maggie Hassan

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Learn More/Take Action

Do you think New Hampshire should participate in RGGI? Whatever your thoughts are, we urge you to make your voice heard. See the "Learn More/Take Action" section on this page for more information.

Issue Status

SB 123, a bill that would give more RGGI funds to municipalities, passed the Senate in March 2013.  HB 630, a bill that would dedicate more RGGI proceeds to the low-income core energy efficiency program, passed the House in March 2013.  HB 306, a bill to lower the cap on carbon emissions and therefore raise the price of allowances, also passed the House in March 2013.  SB 66, a bill that asks the department of environmental services and the public utilities commission to analyze the current system for allowance prices, has been rereferred to committee.

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