The nation's first carbon market - the Regional Greenhouse Gas Initiative (RGGI) - is a huge success for the public's health, the environment, and the economy, according to a new report released today. RGGI states - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont - have reduced carbon pollution by one-third, while saving consumers $1.5 billion on their utility bills, creating over 22,000 additional jobs, and bringing $2.9 billion in additional economic benefit to the region since it began in 2008.
Today's Analysis Group's report updates its 2011 examination of the first three years of RGGI. Like the study of RGGI's earlier years, they found that the initiative produced net benefits to consumers, state governments, and individual state economies. In fact, as the program has matured, states have better maximized the benefits and developed tools to successfully mitigate consumers' costs. In particular, states have increased reinvestment in state energy efficiency programs and other clean energy programs - reinvestment that "stands out as the most economically beneficial use of emission allowance revenues." RGGI is proof that states can reduce carbon pollution - taking action against climate change, the greatest environmental, public health, and humanitarian threat of our time - and economically prosper from it.
With EPA expected to release its final plan for cutting power plant pollution, other states should follow RGGI's lead and embrace and expand clean energy policies in a market-based system. With carbon pollution down over 30 percent with help from RGGI, we know it works as designed to combat climate change--and today's report helps highlight the many collateral economic benefits it can deliver states at the same time.
Clean Energy is the Driver of RGGI's Success
For the most part, states have used RGGI revenues to build on the region's many established clean energy programs to further expand these critical complementary policies, such as portfolio standards requiring specific amounts of energy efficiency and renewable energy in serving utility customers, and clean energy financing mechanisms. These reinvestment decisions are key to RGGI's success.
RGGI states are national leaders in energy efficiency - the top three performing states (achieving savings from smarter energy use that are greater than 2 percent of their utilities' total sales) are all in RGGI. Between 2012 and 2014, energy efficiency investments, driven both by state policies and the reinvestment of RGGI proceeds, helped reduce customer electricity bills by $341 million and natural gas bills by $118 million. In addition, energy efficiency has further reduced the region's electricity and heating bill by suppressing wholesale electricity prices.
Renewable energy as a percent of total electricity generated has doubled since RGGI began, spurred by renewable portfolio standards (RPS) and expanded clean energy financing programs for municipalities, public institutions, and interested residences and businesses. The growth in in-state renewable energy development has helped the RGGI states reduce out-of-state fossil fuel purchases by $1.27 billion over the last three years. Renewable energy also has been integral in improving the region's energy security and resiliency. The carbon allowance market, in tandem with complementary polices, has driven the development of robust clean energy economies and boosted homegrown clean energy jobs across the region.
Different Market, Same Story: California
Along with RGGI, California's carbon market serves as a testament to not only the potential benefits of carbon reduction programs, but also the important role of complementary clean energy policies.
Government reports have clearly shown that the state's clean energy policies have played a significant role in helping California achieve its emission reduction targets in a manner that delivers a range of public benefits and mitigates equity concerns.
Expected carbon pollution reductions from the state's RPS, energy efficiency programs, and appliance and building code standards will account for the lion's share of necessary reductions to achieve California's 2020 statewide limit. This has allowed the carbon allowance prices to remain lower while still achieving results. Without an RPS and only half the expected energy efficiency savings, the state predicted the carbon allowance price would have to increase five-fold to achieve the same emission reductions.
A cap-and-trade system with complementary polices also produces larger economic benefits. Employment, economic growth, and personal income all were higher under a cap with complementary policies than either without any cap or with a cap without complementary policies. Personal income was projected to increase by an estimated $2 billion in 2020 alone - about $50 per person. In addition, annual energy costs for the entire state are projected to decrease by 5 percent.
Implications for Midwest States and Clean Power Plan Compliance
A few voices have argued that complementary, clean energy policies are unnecessary under a market-based system. RGGI and California show that state energy policies can make carbon markets achieve better outcomes. Clean energy policies have played a vital role in the present economic and environmental success both RGGI and California's Cap-and-Trade. And it doesn't end there. A number of groups have all found concrete evidence that a mix of policies, rather than a carbon price alone, is the most efficient and lowest cost method to achieving significant pollution reduction. They are clear: a combination of policies is not only the cheapest and easiest way to achieve significant pollution reductions, but it also helps mitigate potential impacts on low-income and other consumers.
As states prepare for the release of EPA's final carbon pollution standards for power plants, policymakers should not discount the significant role that clean energy policies should have. A carbon price and clean energy policies are not an either-or proposition. Both are critical, complementary tools for reducing dangerous carbon pollution at a low cost, while maximizing benefits to consumers. RGGI and California show that by utilizing both, states can cost-efficiently reduce pollution, mitigate costs borne by consumers and industry, and see significant positive economic benefits from their pollution reduction efforts.
This is a guest post by MAP Fellow Amanda Levin.