Have you heard of RGGI?
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.
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.