On August 6, I tuned into the Pennsylvania Department of Environmental Protection (DEP) webinar titled “RGGI 101 How it Works and How it Benefits Pennsylvanians” because I have a long-standing interest in the Regional Greenhouse Gas Initiative (RGGI). I prepared a https://wp.me/p8hgeb-slpost describing my impression of the presentation against the reality of my experience with it that caught the attention of Daryl Metcalfe, the Chair of the Pennsylvania House of Representatives Environmental Resources & Energy Committee who asked me to provide testimony at the August 25, 2020 committee meeting regarding RGGI. This post summarizes my testimony.
I have been involved in the RGGI program process since it was first proposed prior to 2008. I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. I have extensive experience with air pollution control theory and implementation having worked every cap and trade program affecting electric generating facilities in New York including the Acid Rain Program, Regional Greenhouse Gas Initiative (RGGI) and several Nitrogen Oxide programs. Note that my experience is exclusively on the industry side and the difference in perspective between affected sources trying to comply with the rules and economists opining about what they should be doing have important ramifications. I think this background served me well providing the testimony presented. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.
RGGI is a market-based program to reduce greenhouse gas emissions from the power sector. According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.”
RGGI started in 2009 and the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont have participated ever since. New Jersey was included at the start of the program, dropped out and re-joined in 2020. Virginia recently announced that they would join in 2021. According to this presentation Pennsylvania is planning to join in 2022.
According to the DEP’s RGGI website, “Governor Wolf recently signed an Executive Order that directed DEP to begin a rulemaking process that will allow Pennsylvania to participate in the Regional Greenhouse Gas Initiative (RGGI), with the goal of reducing carbon emissions from the electricity sector”. I know very little about Pennsylvania politics but I did figure out that the Governor is not planning to go through the legislature to have Pennsylvania to join RGGI. Because Pennsylvania not only has significant coal-fired generation but also mines it, there are significant concerns about the impact of joining RGGI on the continued viability of those resources.
I have never presented testimony before so this was a new experience. The web page for the Pennsylvania House of Representatives Environmental Resources & Energy Committee lists the transcript and presentations for the witnesses who presented testimony on August 24, 2020. If you are very bored there is even a video of the testimony of the six presentations.
The first discussion point addressed carbon pricing because ultimately RGGI is a carbon pricing scheme. I admit that the theory of putting a price on carbon is attractive but there are very real problems associated with implementation. Unless the carbon price is set across the globe and covers all energy sectors pollution leakage, where a pollution reduction policy simply moves the pollution around the globe rather than actually reducing it, is an inevitable short-coming. Within the electric generating sector there is a very real problem because power plants have limited control options: switching fuels or operating less. As a result, generating companies simply treat it as an added cost to doing business which is pretty much the same as a tax. While proponents call this a cap and dividend program I call it a cap and tax program and because all energy taxes are regressive this will impact those who can least afford additional energy costs.
RGGI proponents claim that it is a success and often cite the observed emission reductions. As shown in my testimony and previous post, both the PA DEP and RGGI accurately claimed that regional CO2 emissions are down on the order of 50% since 2005, but RGGI had very little to do with it. The vast majority of the reductions were due to fuel switching from coal and residual oil to natural gas. Because the RGGI price adder is small relative to the fuel cost differential RGGI itself had very little to do with the observed fuel switching. I believe that the only reductions that RGGI can claim are those that result from the investment of RGGI proceeds. Using that criterion, RGGI is only responsible for on the order of 5% of the observed reductions.
I also showed that the emission reductions would have a negligible effect on global warming itself. I found there would be a reduction, or a “savings,” of approximately 0.0011°C by the year 2050 and 0.0023°C by the year 2100 if all Pennsylvania CO2 emissions were eliminated. To give an idea of how small this temperature change is it is the same as a change in elevation of nine inches or change in latitude of two tenths of a mile.
Finally, I compared the emissions and operational changes of Pennsylvania relative to the nine states in RGGI since 2009 when RGGI started. Pennsylvania without RGGI has accomplished nearly as much as the nine RGGI states in terms of maintaining fossil generation levels while reducing emissions, improving efficiency, and switching to cleaner fuels.
I concluded that despite the claims made by its proponents, upon close examination RGGI is an inefficient method for reducing CO2 emissions. The affected sources will treat it simply as a tax. As a result, that means that the primary impact to the public is a regressive tax. Fuel switching to Marcellus Shale gas created by Pennsylvania’s fracking revolution was the primary cause of the observed decreases in emissions. Clearly, Pennsylvania has done more to reduce CO2 in the RGGI states than the RGGI itself and that will continue whether or not Pennsylvania joins RGGI.