How New Jersey Can Maximize the Benefits of the Regional Greenhouse Gas Initiative
http://www.environmentnewjersey.org/reports/global-warming/global-warming-reports/cutting-pollution-cutting-costs-how-new-jersey-can-maximize-the-benefits-of-the-regional-greenhouse-gas-initiative
New Jersey is one of 10 northeastern states taking part in the Regional Greenhouse Gas Initiative (RGGI), a first-of-its-kind program to limit emissionsof carbon dioxide—the leading pollutant responsible for global warming—from power plants in the Northeast.
RGGI will cap carbon dioxide emissions from power plants at projected 2009 levels through 2014 and cut emissions by 10 percent by 2018. The 10 RGGI states are in the midst of adopting the rules necessary to implement the program.
While the most important rules governing the program—including the level of the emission cap—have already been agreed upon by the RGGI states, the regional process gives states flexibility in how to implement several important parts of the program.
By adopting strong rules for the implementation of RGGI, New Jersey can maximize the environmental benefits of the program while protecting consumers.
RGGI is an important step forward for New Jersey in the fight against global warming.
• New Jersey has a great deal to lose from unrestrained global warming. Projected future impacts of global warming on the state include the possible inundation of parts of the Jersey Shore by rising seas, increases in heat-related and smog-related deaths, an increase in heavy precipitation events leading to flooding, and impacts on New Jersey agriculture and
wildlife.
• Power plants are the second-largest source of carbon dioxide pollution in the Northeast, accounting for one-quarter of the region’s emissions.
• While not perfect, RGGI is a trail-blazing program that will set precedents for future action on global warming at the state, regional and federal levels.
New Jersey should auction 100 percent of pollution allowances under RGGI and invest the proceeds in programs
to improve the energy efficiency of the state’s economy.
Cutting Pollution, Cutting Costs
• The pollution permits (called “allowances”) issued under RGGI will likely have a value of between $46 million and $229 million per year, at an estimated allowance price of $2 to $10 per ton.
• Giving allowances away to polluters enables polluters to achieve unjustified windfall profits. In the European Union’s emission trading system, which is similar to RGGI, power producers have received billions of dollars in windfall profits at the expense of consumers and businesses.
• Auctioning allowances to polluters is consistent with the “polluter pays” principle and would generate significant amounts of money to use for public purposes. By investing the proceeds from auctions in energy efficiency, New Jersey can reduce the cost of RGGI to consumers. Indeed, a study conducted for the RGGI state working group shows that pairing RGGI with a doubling of energy efficiency spending would reduce the average household electric bill. New Jersey should resist efforts to weaken RGGI in the guise of containing the costs of the program. Caps on the cost of emission allowances and expansion of the use of “offsets” should not be considered.
• RGGI already includes several measures to prevent significant increases in electricity costs. Power plants may meet some of their compliance obligation through the use of offsets, which are emission reductions achieved at facilities other than power plants. Power plant owners may also bank allowances
and offset credits for use later on in the program, thereby preventing price spikes. Finally, RGGI includes provisions
to allow greater use of offsets if allowance prices rise beyond certain levels.
• Cost caps and expanded use of offsets would threaten the integrity of the RGGI emission cap, reducing (and possibly eliminating) the emission reductions achieved by power plants in the Northeast.
• Imposing cost caps or expanding the use of offsets would require New Jersey to rewrite portions of the RGGI model rule that have been agreed upon by all 10 states. Doing so would undermine New Jersey’s commitment to the RGGI process and open the door for further changes by other states—changes that might not be in New Jersey’s best interests. New Jersey should take additional steps to ensure that RGGI delivers the maximum benefits for the state.
• New Jersey should require that emission allowances be retired when consumers purchase renewable electricity (or “green power”) through their utilities. More than 10,000 New Jersey consumers have purchased “green power” products, believing that their actions will reduce environmental impacts. By tying renewable energy purchases to the retirement of pollution allowances under RGGI, the state can ensure that those purchases deliver their promised environmental benefits and achieve greater reductions of global warming emissions from power plants.
• New Jersey should reject efforts to exempt electric generators that consume most of the power they produce on-site from the RGGI emission cap.
• New Jersey should play a leading role in developing a regional response to the problem of emissions “leakage,” which is the potential for distribution utilities in RGGI states to increase their imports of dirty power produced outside of the region, thereby reducing the aggregate emission reductions delivered by the program. New Jersey should also work with other states to tighten the emission cap under RGGI and consider short-term measures to ensure that the program achieves real emission reductions upon taking effect in 2009.
