The Regional Greenhouse Gas Initiative (RGGI) was supposed to be nearing completion of a 2016 Program Review but the election of Donald Trump and the fate of the national Clean Power Plan has delayed that process. This is the first post in a series of posts that will discuss how RGGI has fared so far. This particular post will provide background information so that I don’t have to include it every time. The RGGI stakeholder process is dominated by its adherents and now that I am retired I can offer an alternative view of the program. In this post I will offer my thoughts on whether the program has been successful.
RGGI is a cap and auction program in nine states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont – to reduce greenhouse gas emissions. According to the most recent RGGI Investment Summary Report:
Proceeds from the Regional Greenhouse Gas Initiative (RGGI) have powered an investment of $1.37 billion in the energy future of the New England and Mid-Atlantic states. This report reviews the benefits of programs funded through 2014 by RGGI investments, which have reduced harmful carbon dioxide (CO2) pollution while spurring local economic growth and job creation. The lifetime effects of these RGGI investments are projected to save 76.1 million MMBtu of fossil fuel energy and 20.6 million MWh of electricity, avoiding the release of approximately 15.4 million short tons of carbon pollution.
I have been involved in the RGGI program process since its inception. Before retirement from a Non-Regulated Generating company, I was actively analyzing air quality regulations that could affect company operations and was responsible for the emissions data used for compliance. From that background let’s look at the RGGI results quoted above.
The biggest flaw in the adherent’s vision of RGGI success is that RGGI is a driver of affected source decisions. In my opinion based on my experience and discussion with company folks responsible for the economics and operations of affected facilities where I worked and elsewhere, RGGI is simply a tax. Yes it adds to the cost of doing business but because the cost of allowances can be added into the bid price it is a nuisance and not a driver of decisions. I will address how this added cost ultimately affects emissions in a later post.
When RGGI notes that $1.37 billion is being invested in the energy future of the New England and Mid-Atlantic states that number reflects the proceeds from the allowance auctions aka the tax. Because this is a carbon tax there a couple of cautionary tales. The reference notes that the nine participating RGGI states received $1.79 billion in auction proceeds in the period covered by this report. RGGI investments represent $1.37 billion spent to date and another $329.4 million is committed to 2015 and future programs. Note that these numbers do not total up. Despite best intentions by those folks who set up the program $93.1 million has been transferred to state general funds by politicians. In other words any carbon tax should have iron clad specifications on how the money will be used or politicians will get involved and co-opt the stated goal of the tax.
In RGGI the stated goal was to invest the RGGI proceeds in programs that would ultimately reduce carbon emissions and protect the rate-payers. The Investment Summary Report notes the fraction of funding that reduce carbon emissions (overall 80%) for energy efficiency (57%), clean & renewable energy (15%), and GHG abatement (8%) programs. Direct bill assistance (15%) is a more difficult sell as a carbon abatement program but because increased costs to the consumer disproportionately affect those least able to afford those increases I personally can live with those programs. However, 4% of the funds went to “administration” and another 1% to the RGGI organization itself. Clearly when big bucks are involved politicians are not the only ones attracted to the trough. The concept of a carbon tax that offsets that cost and returns all proceeds to offset other taxes is attractive. Based on RGGI, however, be careful what you wish for.
To their credit RGGI analyses have always been careful to not over-sell the actual emission reductions due to RGGI itself. When the Program Review notes that the lifetime effects of these RGGI investments are projected to save 76.1 million MMBtu of fossil fuel energy and 20.6 million MWh of electricity they are basing those numbers on the displacement of energy and emissions due to their energy efficiency, clean and renewable energy and GHG abatement programs. As noted earlier these numbers will be addressed in a later post.
Finally let’s consider the ultimate goal of the program – GHG reductions. The Program Review Summary claims their investments have avoided the release of approximately 15.4 million short tons of carbon pollution. However, note that they spent $1.37 billion to achieve those reductions so the cost per ton is $88.67. Given that the EPA social cost of carbon is $36 per ton these reductions are not cost effective by that measure.
However one thing is missing in all of the analyses and reports to date. The ultimate purpose of the program is to lower global warming but nothing has ever been published quantifying what these reductions will do in that regard. A back of the envelope calculation shows why. A recently published paper estimates that the Federal Clean Power Plan will reduce global temperature rise by 0.013 degrees Centigrade. The Clean Power Plan is supposed to reduce CO2 emissions by 870 million tons. The carbon reductions attributable to RGGI are 15.4 million tons and simply pro-rating the published projection of global temperature rise with the RGGI emissions yields 0.00023 degrees Centigrade. In my opinion because we cannot possibly measure that small a change in temperature the global warming benefit of this program is nil.
I will give RGGI credit for developing the infrastructure to conduct a cap and auction program. They have an auction system that has conducted numerous sales without a hitch, there is a CO2 tracking program and the compliance methodology works. In addition the investments in energy efficiency and direct bill assistance are social benefits with no regrets. As a result I believe that RGGI is only a qualified limited success and no where near as successful as it its adherents claim.
 Bjorn Lombory, 2015: Impact of Current Climate Proposals, Global Policy, Article first published online: 9 NOV 2015, DOI: 10.1111/1758-5899.12295, http://onlinelibrary.wiley.com/doi/10.1111/1758-5899.12295/full