The Future of the Regional Greenhouse Gas Initiative
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New York, Oct. 23, 2012—The Regional Greenhouse Gas Initiative (RGGI) has benefited the economy of participating states but achieved only modest reductions in greenhouse gas reductions, according to a panel of energy experts convened at Columbia Law School last night. To achieve greater reductions, RGGI should adopt a stricter carbon cap at its three-year program review.
“By just about any measure, RGGI has been a success,” said Jared Snyder, assistant commissioner for Air Resources, Climate Change and Energy, New York Department of Environmental Conservation. Since its inception three years ago, greenhouse gas emissions from the electricity sector are down 30%.
However, most of this reduction appears to be due to the low price of natural gas rather than the RGGI cap and trade restrictions; energy producers switching from expensive coal and petroleum to natural gas produce fewer emissions. In fact, the RGGI cap for carbon emissions, based on predictions, turned out to be far higher than actual emissions, meaning electricity producers have had few incentives to reduce emissions.
As a result, said Robert Stavins, Albert Pratt Professor of Business and Government, John F. Kennedy School of Government at Harvard University, “[RGGI] doesn’t deserve credit for much.”
What RGGI has done is benefit the economy in participating states. Over three years, the 10 participating states (before New Jersey withdrew) saw a net gain of $1.6 billion to their economies and 16,000 new jobs, according to a study presented by Susan Tierney, managing principal at Analysis Group. States acquire income from the auction of carbon allowances under the RGGI system, profits that can be reinvested in the economy in various ways. Investing in energy efficiency produces the “biggest bang for the buck,” says Tierney. And surprisingly, consumers are the real winners, seeing lower electricity costs in the long term.
Energy producers, though, bear the costs of this program, according to Gavin Donohue, president and chief executive officer of the Independent Power Producers of New York. “We are concerned that the money raised at auctions is not being reinvested in electricity producers to reduce emissions at the source.” New York raised $395 million from RGGI auctions, and only $30 million was invested to reduce emissions at electricity producers. $90 million was used to balance the New York state budget deficit.
At its three year program review, RGGI has the opportunity to review some of these challenges. Ross Gould, Air and Energy Program Director for the Environmental Advocates of New York, urged RGGI officials to take this opportunity to adopt stricter standards to restrict emissions. Panelists recognized that a reduced carbon cap is a necessary step to improve RGGI’s effectiveness, but they were skeptical as to its political feasibility.
Moreover, a reduced cap could mean more energy will be imported from high-emission producers in non-RGGI states, an event called leakage. “If you lower the cap, the price of electricity [in RGGI states] will begin to go up, and you will have massive leakage,” said Stavins, supported by Donohue.
One way to address leakage would be for the United States to adopt a national climate change policy to address greenhouse gas emissions. “I think you are unlikely to see a well-crafted national policy,” said Tierney, voicing the consensus of the panel. Instead, Stavins predicted that the future of climate change regulation in the United States may be a series of linked regional programs like RGGI.
In coordination with the event, CCCL released a report on the “Legal Issues in Regulating Imports in State and Regional Cap and Trade Programs.”
The panel was moderated by Michael Gerrard, Andrew Sabin Professor of Professional Practice at Columbia Law School and Director of the Center for Climate Change Law. The panel was co-sponsored by the Center for Climate Change Law; Earth Institute of Columbia; Environmental Law Institute; New York State Bar Association, Environmental Law Section; New York City Bar Association, Environmental Law Committee and Energy Committee; and the New York League of Conservation Voters. It was made possible thanks to the generous support of the John Gorham Palfrey Memorial Lectureship Fund.
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