Northeast’s New GHG Goals Would Improve Grid Reliability, Wholesale Prices, Experts Expect

by | Aug 28, 2017

Nine states in the Northeast are proposing to increase their greenhouse gas reduction goals by 30%, relative to 2020 levels. The Regional Greenhouse Gas Initiative (RGGI), which formed in 2009, would do so through a cap-and-trade system.

“With (the) announcement, the RGGI states are demonstrating our commitment to a strengthened RGGI program that will utilize innovative new mechanisms to secure significant carbon reductions at a reasonable price on into the next decade, working in concert with our competitive energy markets and reliability goals,” said Katie Dykes, chairwoman of the Connecticut Public Utilities Regulatory Authority and current chairwoman of RGGI.

High tech giants such Apple, Amazon, Intel, Microsoft and Facebook support a carbon-constrained economy and have vowed to get all of their energy from renewable sources. Representatives of manufacturing trade associations are concerned, however, it such regulations would raise the cost of production and hurt their ability to compete. 

According to RGGI, CO2 emissions arising out of the power sector in the Northeast are already 50% less than in 2009. The money raised from selling credits is plowed into a fund that invest in new technologies to control pollution levels. One state, New Jersey, has said that the efforts have the raised the cost of electricity to businesses and in effect become a de facto tax on them.

The individual states could choose how to implement the proposed rules and even make them stringent, if they chose to do so. Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont are part of the coalition.

Just as California has upped its goals to decrease its CO2 levels by 40% by 2030 from 1990 levels, RGGI is also raising the stakes — all in response to the Trump administration and its efforts to roll back such environmental initiates. The president says that the economy is restrained by unfair environmental burdens put upon businesses and especially coal and natural gas producers.

To that end, the White House has pulled out of the Paris climate accord and has advised his Justice Department to quit defending the Clean Power Plan at the appeal’s court level — all underscored by EPA Administrator Scott Pruitt’s comments on the CNBC Network: “I think that measuring with precision human activity on the climate is something very challenging to do and there’s tremendous disagreement about the degree of impact. So no, I would not agree that (carbon) is a primary contributor to the global warming that we see.”

A cap-and-trade system works like this: Governments set pollution limits and then credits are either auctioned or allocated to industry. Those companies that are able to exceed the expectations can either bank their allowances for future use or sell them to other businesses that are unable to meet their obligations. As the ceilings come down, overall emissions then fall.

According to a release, the proposal would change the system to include the addition of an Emissions Containment Reserve (ECR) wherein states can withhold allowances from auction if emission reduction costs are lower than projected. What that does is to keep the price of carbon credits high enough to motivate businesses to invest in new technologies. The trigger price to withhold credits: $6 in 2021, rising by 7% a year.

The auctions of credits have generated more than $2.7 billion. The Analysis Group says that investments funded through RGGI proceeds improve the cost-effectiveness and reliability of the grid by reducing peak demand, which in turn lowers wholesale power prices and helps avoid the need for costly infrastructure investments.

“As the lowest-lying coastal state, Delaware is particularly vulnerable to the effects of climate change and must act to reduce greenhouse gas emissions,” said Shawn M. Garvin, Secretary of the Delaware Department of Natural Resources and Environmental Control. “RGGI proves that state leadership and cooperation can result in meaningful greenhouse gas reductions that in turn, mitigate the effects of climate change on our economy, communities and natural resources. RGGI is a cost-effective and flexible mechanism that can serve as a national model for reducing carbon emissions that accelerate climate change.”

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