Regional Greenhouse Gas Initiative
Over the past five years, the governors and environmental and energy agency staff from ten Northeast states have worked to develop the Regional Greenhouse Gas Initiative (RGGI). A market-based plan, RGGI aims to cap and then reduce global warming pollution from the region’s electric power plants over the next decade. The participating states include Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Delaware, and Maryland.
RGGI is known as a “cap and trade” system, because the overall limit on emissions (the “cap”) is translated into a fixed number of permits, known as allowances. Each allowance authorizes a power plant to emit one ton of carbon dioxide (CO2), the dominant global warming pollutant. The creation and distribution of these allowances creates a market, in which allowances can be bought and sold (the “trade”).
On Thursday, September 25, 2008, the RGGI states made history as they launched the program by conducting the United States’ first-ever auction of the allowances created under a mandatory cap and trade system. Auctioning allowances (rather than distributing them to polluters for free) is an extremely important precedent for the national climate policy debate, which the Union of Concerned Scientists expects to be a high priority for the new Congress and administration in 2009. In this respect, last week’s auction was a big success: all of the more than 12.5 million allowances available were sold at a clearing price of $3.07/ton, yielding over $38.5 million for the six participating states. (Four states – New York, New Jersey, New Hampshire, and Delaware – were unable to complete the regulatory processes necessary for them to take part; they will participate in the subsequent auctions).
The other important precedent being established by RGGI is that all the states have committed to spending the revenue they receive from the auctions on programs to help homeowners and businesses improve energy efficiency and increase their use of clean energy technologies like solar and wind. Numerous studies have shown that energy efficiency is the least expensive way to reduce our emissions—in fact, it can deliver significant savings. It is extremely important that states maintain this commitment, especially in light of current concerns about the economy and energy security. Investment in energy efficiency and clean energy technology reduces energy bills, creates jobs and is essential to decreasing our dependence on fossil fuels—which is at the root of global warming.
RGGI will stabilize the overall level of CO2 emissions allowed from power plants in the region at 2005 levels starting in 2009 through 2014, followed by a 10 percent reduction in emissions by 2019. While the reductions under RGGI are modest, the plan represents an important first step in tackling emissions reductions and provides a strong policy template for the nation, demonstrating the viability and effectiveness of a market-based approach to level and then reduce global warming pollution.
