Pioneering Carbon-Cutting Program Turns 10: What Now, RGGI?

RGGI turns 10: To ensure that RGGI's next 10 years are at least as successful as its first, the RGGI states should use as a model their bold and ambitious efforts in the past.
Credit: Phillip Bragg via Flickr

This post was co-authored with my colleague Bruce Ho.

Ten years ago this month, when the U.S. needed leadership to fight global climate change, seven states in the Northeast and Mid-Atlantic stepped up to the plate to establish the Regional Greenhouse Gas Initiative (RGGI). The results have been phenomenal: cutting carbon pollution from power plants by a whopping 37 percent while saving $395 million on customer utility bills thus far.

On August 15, 2006, Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont published the model rule for RGGI. A bipartisan effort from the start—New York’s Republican then-governor George Pataki got the ball rolling—RGGI became the nation’s first cap-and-invest program to lower dangerous carbon pollution from power plants while saving consumers serious money on energy, creating a slew of good, local jobs, and improving public health.

As we approach its 10th anniversary, RGGI now includes nine states. (Maryland, Massachusetts and Rhode Island joined the original seven while New Jersey left: Its Governor Chris Christie illegally pulled his state from the program in 2011, a fact NRDC proved in court and is still fighting.) These nine states currently have an opportunity to lead again in the fight on climate change as they think now about where to go post-2020, as part of a scheduled program review.

We’ve got some directions to offer: By setting ambitious targets for cutting carbon pollution between 2020 and 2030, the RGGI states can continue to lead on climate; turbocharge the program’s already substantial economic benefits; more cost-effectively meet their goals to reduce their economy-wide greenhouse gas emissions by 40 percent by 2030 and 80 percent by 2050; and, comply with—and even exceed—the U.S. Environmental Protection Agency’s requirements to cut carbon pollution from power plants under the Clean Power Plan (CPP).

What’s not to like?

Don’t take just our word for it, either. More than 70 businesses and 20 institutional investors headquartered and operating in the RGGI region—including household names like Ikea, Gap, and Staples—sent a letter to the RGGI governors earlier this month. They urged the governors “to build on RGGI’s success by continuing to lower the emissions cap on the electricity sector, by 5 percent per year post-2020, because it is good for our economy.”

A 5 percent per year carbon cap decline after 2020 is entirely feasible. RGGI’s actually been on that trajectory since it was first implemented in 2009. In fact, according to a study by Synapse Energy Economics, continuing that trajectory through 2030 could spark substantial economic growth, including more than 58,000 new jobs a year and consumer energy savings of $25.7 billion. By stepping up to the plate now as they have in the past, the RGGI states can create an even stronger, more effective program.

Looking back as we move ahead

As we look ahead to RGGI’s future, let’s begin with a little backstory and a quick review of RGGI’s successes. After the seven RGGI states finalized their original agreement in August 2006, they gave stakeholders and the market time to prepare. Thus, the program kicked in in January 2009 and, since then, has produced some especially impressive results:

Despite the usual Chicken Little critics’ warnings that RGGI would tank the region’s economy, the opposite has happened. As member states cut carbon pollution by 16 percent more than non-RGGI states, they saw economic growth that was 3.6 percent higher, according to a recent report by our colleagues at the Acadia Center. And while electricity prices in the rest of the country climbed by 7.2 percent, they dropped in the RGGI region by 3.4 percent. In other words, the RGGI states both cut emissions and grew their economies faster than other states, all while experiencing declining average electricity prices—and bills. That’s not an implosion. It’s a home run.

What now?

The question now for the RGGI states is how best to continue their decade of climate leadership, economic development, and substantial public health improvements.

The RGGI states have modeled several routes to keep cutting carbon pollution through 2030. The most ambitious—a 5 percent pollution savings each year between 2020 and 2030—is well supported by stakeholders, could create more than 58,000 jobs annually, and save consumers almost $26 billion on energy. It also would be the least-cost plan to meet the RGGI states’ 2030 economy-wide greenhouse gas emissions reduction targets (all while staying on track to meet their 2050 commitments).

And here’s an important point about the time horizon: In considering their options, the states should be sure to adopt a plan that extends until 2030. While almost all of RGGI’s models extend through that date, one looks out only until 2024. Adopting such a short-term plan would be a mistake. To begin with, it won’t provide the certainty that the electric sector needs for cost-effective planning. And it won’t align with the EPA’s Clean Power Plan, which requires states to meet power plant emission reduction limits through 2030.

RGGI beyond the region

RGGI works, in part, by requiring power plants in the region to acquire allowances (either at quarterly auctions or on the secondary market) for every short ton of carbon dioxide pollution they emit into our overloaded atmosphere. (Those quarterly allowance auctions bring in revenues that the states use to support consumer programs. The vast majority of that money goes toward energy efficiency, including programs that help low-income households; renewable energy; direct bill assistance; and other greenhouse gas abatement programs.) The total amount of emissions allowed under RGGI declines by 2.5 percent each year through 2020.

The Clean Power Plan has provided non-RGGI states with the option of adopting a similar approach to meeting carbon-reduction requirements. So with the RGGI states’ approval, power plants in the region could trade allowances with plants in non-RGGI states and vice versa, creating a larger carbon trading market.

That could help lower the cost of power-plant carbon reductions and spread RGGI’s best practices to other states and regions. But it will only work well with the right safeguards in place. Specifically, the RGGI states should only trade with states that limit carbon pollution from both new and existing power plants, as the RGGI states do. After all, our atmosphere doesn’t distinguish between carbon pollution from new power plants and existing ones—they both pack the same punch in driving climate change. In accordance with the section of the Clean Air Act that authorizes the Clean Power Plan, Section 111(d), states have the option of only including existing power plants in their compliance plans (subject to meeting provisions regarding leakage; more on that issue from our friends at Next Gen Climate America here). But if RGGI were to trade with states that take the “existing-only” approach, trading could simply shift electricity generation and carbon emissions from existing power plants in the RGGI region to new and unregulated power plants outside of it, thereby undercutting the program’s climate benefits.

Ten years ago, few states understood that action on climate could simultaneously create a slew of economic advantages and improve public health. But the smart RGGI states did, and have seen the benefits to their economies, public health, and the environment ever since. Now, as they prepare for the future, they should look to their bold and ambitious efforts in the past as a model and further strengthen the RGGI program. That will ensure that RGGI’s next 10 years are at least as successful as its first.