RGGI’s Year-end Review: Climate Progress with More to Come

Part of NRDC's Year-End Series Reviewing 2016 Energy Developments

This blog post was co-written with my colleague Bruce Ho.

For the Regional Greenhouse Gas Initiative (RGGI), 2016 was a year of progress. The pioneering, bipartisan climate initiative among nine Northeastern and Mid-Atlantic states continued to slash dangerous carbon pollution from the region’s power plants while generating more than a quarter of a billion dollars that the RGGI states will invest in energy efficiency, renewable energy, and other programs that cut consumers’ energy bills, create new jobs, and improve our health.

After eight years of success under RGGI, there’s every reason to believe that the states—Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont—are well set to keep up their progress through the end of this decade.

But the RGGI states aren’t stopping there. In 2016, they continued to make progress in the review process they launched to figure out the best ways to keep up their climate leadership beyond 2020. What’s more, this progress came against a backdrop of individual RGGI states’ efforts to accelerate clean energy and carbon reductions—significant actions that will support a stronger RGGI program in the years ahead.

Below, we highlight some of the RGGI region’s key accomplishments in 2016, and why NRDC is optimistic about continued climate leadership from the RGGI states in the years to come. While the states previously intended to reach a post-2020 agreement by the end of this year, we’re confident, given their progress to date, that the states are well-positioned to arrive at a well-designed and ambitious package early in 2017. As Kit Kennedy and Roland Hwang, the directors of NRDC’s Energy and Transportation Program recently wrote, progress at the state and regional level is critical to maintaining momentum, as we continue to press for the federal leadership we need on climate change and clean energy.

The RGGI states made notable progress on their program review

RGGI is an innovative cap-and-invest program that works by limiting (capping) carbon emissions from power plants and requiring these plants to purchase allowances for every ton of carbon they release into our already overloaded atmosphere. The RGGI states then invest that allowance revenue in a host of good things, as each state sees fit. The results have been impressive. Since 2009, RGGI has helped cut power-sector carbon pollution in the region by a substantial 37 percent. The program has added at least $2.9 billion in regional economic growth; created health benefits worth $10 billion; produced 30,000 new job-years (a job year is one year of full-time employment); and saved consumers at least $618 million on energy, with $4 billion more expected in the years to come. Despite RGGI critics’ early claims that electricity prices would skyrocket, they’ve actually fallen by 3.4 percent, while prices in other non-RGGI states rose by an average of 7.2 percent. Those are wins all around.

One of RGGI’s great strengths is that every four years the states review the program to ensure it continues to generate these benefits and achieves its potential. In 2013, the states cut RGGI’s carbon pollution cap by 45 percent and agreed to further reduce emissions through 2020. In November 2015, the states launched their current review, with the goal of setting RGGI’s cap trajectory through 2030.

Toward that end, the states modeled several future emissions reduction pathways over the last year. Their most recent modeling suggests they are honing in on a post-2020 RGGI cap reduction in the range of 2.5 to 3.5 percent per year through 2030. (One of the big takeaways from this modeling is that there’s very little extra cost—but big emissions benefits—associated with the more ambitious 3.5 percent reduction level.) The states also presented a potential innovative new mechanism—an Emissions Containment Reserve, or ECR—that could secure even more carbon reductions at reasonable cost. An ECR could potentially enable the states to achieve a reduction in carbon pollution of 5 percent per year, the amount NRDC, our environmental and public health allies, and numerous businesses in the region recommend.

The states also appear to be taking seriously the need to reform RGGI’s problematic Cost Containment Reserve (CCR), which, as currently designed, undermines regional emissions goals, as well as the need to address the problem of over-allocated, banked emissions allowances. (For more on these issues, see our recent blog post.)

Perhaps less noticed, but also important, the states have been evaluating post-2020 cap trajectories based on a “fixed baseline” (the 2020 cap level), rather than the current cap’s “year-over-year” decline. Using a fixed baseline can achieve more emissions reductions, which is why NRDC and others have been pushing for this change, and we’re glad to see the states respond.

We’re also pleased that the states have maintained their historic commitment to transparency and stakeholder engagement, holding four public, regional stakeholder meetings in 2016 (as well as additional meetings in individual states) as part of the program review, and providing other opportunities for stakeholder input.

Individual RGGI states continued to lead on climate change at the state level

Many of the states also continued to make bold progress on climate change and clean energy outside of RGGI, something that will make it even easier to achieve a stronger post-2020 RGGI cap. Such progress included:

• New York formalized Governor Andrew Cuomo’s commitment to 50 percent renewable energy by 2030 under the state’s Clean Energy Standard, a major component of the governor’s commitment to reduce economy-wide greenhouse gas emissions by at least 40 percent by 2030.
• Massachusetts Governor Charlie Baker signed into law legislation to procure 1,600 megawatts of offshore wind power and another 1,200 megawatts from hydropower, onshore wind, solar, or other renewable energy resources.
• Next door, Rhode Island Governor Gina Raimondo signed a bill to grow her state’s renewable energy standard by 1.5 percent per year, requiring 38.5 percent of the state’s electricity to be renewable in 2035.
• And in Maryland, Governor Larry Hogan signed a bill to reduce his state’s greenhouse gas emissions by 40 percent by 2030. The Maryland bill isn’t self-implementing; state agencies still have to create and implement the policies that will enable Maryland to reach this goal. But the goal can be achieved using a stronger RGGI as well as renewed state commitments to renewable energy and energy efficiency, all things NRDC hopes to see in 2017.

Clearly, bipartisan climate leadership in the region is alive and well. And these and other state clean energy actions will make achieving a more ambitious RGGI program even easier. (For more details on how, see this blog post.)

Public support for RGGI continues to be strong

Over the last year, NRDC and our many allies in government, public health, the energy industry, community groups, and business, along with overwhelming majorities of the region’s residents, voiced strong support for strengthening the RGGI program so that it can do even more of what it already does so well.

According to a poll commissioned by our friends at the Sierra Club, an overwhelming majority—3 in 4 respondents—supports tightening the RGGI cap at the rate of 5 percent per year through 2030. That support comes from majorities of Democrats, Independents, and Republicans, including those identifying as conservative Republicans.

These results shouldn’t surprise: Founded by a bipartisan group of governors, the market-based RGGI program has enjoyed broad support since its inception; RGGI’s benefits have been celebrated by environmentalists and the business community alike. In fact, this year, a group of 73 businesses, including companies such as the Gap, Ikea, and Staples, urged the states 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.”

As we head into the new year, we look to the states’ governors to make continued progress and achieve a strong agreement in the RGGI program review. That agreement should include a continued cap reduction of at least 2.5 percent per year through 2030 (and hopefully closer to 5 percent, possibly through adoption of a new Emissions Containment Reserve). We also look forward to reforms that fix problems with the CCR and excess, banked allowances, and to continued investment of RGGI revenues in energy efficiency and other programs that help accelerate clean energy and save consumers money on their bills.

Even as we face the headwinds that the incoming Trump administration will likely generate nationally, the RGGI states can continue to serve as a beacon to individual states, regions, and the country as a whole by agreeing to this strong climate policy package and by showing how growing the economy and improving the environment can continue to go hand-in-hand. Continuing this regional progress is critical, as we press for renewed federal leadership and look to defend the climate and clean energy advances we’ve already made.