Because I have a long-standing interest in the Regional Greenhouse Gas Initiative (RGGI), I checked out a Pennsylvania Department of Environmental Protection (DEP) webinar held on August 6, 2020. I prepared a post describing my impression of the presentation against the reality of my experience with RGGI 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 as described here. Sadly, the plan to join RGGI is still alive. This post looks at a couple of the most recent claims made by DEP for projected emission reductions. Thanks to a friend for alerting me to the inconsistencies.
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 on 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. 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.
The DEP website describing RGGI states: “By participating in RGGI Pennsylvania will reduce climate pollution from carbon emissions by a massive 188 million tons by 2030.” At the same webpage, DEP further states “Air pollution Reductions: Carbon pollutions – 188,000,000 tons, Nitrogen Oxide pollution – 112,000 tons and Sulfur Dioxide pollution – 67,000”. This post will compare the CO2 projections to other estimates.
The Pennsylvania Citizens Advisory Council reviews all environmental regulations and makes recommendations. At the May 19, 2021 the Council addressed the proposed regulation implementing RGGI. Slide 10 (shown below) of the presentation reports the proposed cap levels for Pennsylvania’s participation in RGGI. The RGGI annual reductions summed from 2022 to 2030 total 19,914,960 tons. The “massive” 188 million ton reduction is over a different time period including at least 2021 but clearly the RGGI rule is not the primary driver of expected emission reductions. Another way to look at the RGGI reductions is to compare total CO2 emissions baseline for the period 2022-2030 if emissions stayed at the 2020 emissions rate throughout the period (779 million tons) to the total RGGI budget over that period (690 million tons). In that scenario RGGI will reduce emission by 88 million tons which is just 47% of the reduction claimed by DEP on their website.
The meeting materials for the Citizens Advisory Council also included modeling results which should be the basis for the DEP claims. They used ICF’s Integrated Planning Model® (IPM) to simulate the power generation system. The modeling used the “most recent laws, policy changes, inputs & assumptions”. Note that this model only projects impacts for the power sector and wholesale electric costs, it does not include costs for the economy as a whole. The model is run for two cases: a reference case (without the RGGI regulation) and a policy case (with the RGGI regulation) from 2021 going out to 2030. (I believe that 2021 is the starting point for the summary totals listed in the spreadsheets.)
The IPM results can be used to determine the effect of RGGI on emissions. The Pennsylvania CO2 emissions baseline for the period 2021-2030 using the the IPM Reference Case is 679 million tons. The most recent ICF Policy Case modelling results report Pennsylvania CO2 emissions for the period 2021-2030 to be 582 million tons which yields a planned reduction due to RGGI participation of 97 million tons or an overall reduction of 14.3% which is just over half of the 188 million ton reduction claimed by DEP. Even considering the total RGGI reductions within all the RGGI states, the results of the two ICF Models are only estimated to reduce CO2 emissions by 75 million tons (4.6%) in the 12 RGGI States. In fact, IPM projects that CO2 emissions will increase in the other states by 22 million tons when Pennsylvania joins RGGI. The ICF Case results do not report estimated emissions for either Nitrogen Oxides or Sulfur Dioxide so I could not check those claims.
The slide presentation presents six 2021 modeling results key takeaways that are listed below with my comments in italics:
1: Confirmed Starting Allowance Budget: Original allowance budget confirmed at 78 million tons of CO2. The final RGGI agreement for participation established the budget shown in slide 10 above.
2: Significant Avoided Emissions through RGGI participation: All modeling shows that PA would experience significant CO2 reductions as a RGGI participating state. The total RGGI budget from 2021 to 2030 is reduction is 690 million tons (assume 2020 emissions for 2021 budget) and the IPM reference case for that period totals 679 million tons which means that the RGGI rule itself will only reduce CO2 emissions 11 million tons when 2021 emissions are included.
3: Sharp Decline in Coal Generation by 2025: Overall PA coal generation decreases significantly with or without RGGI participation. In other words, RGGI has little to do with all the CO2 emission reductions associated with changes in coal generation. The IPM modeling results for fuel consumption shows that by 2030 RGGI has no projected effect on coal generation. The results shown also suggest that the projections should be used cautiously because it shows an idiosyncrasy of IPM. Note that in 2020 the projected emissions are different in Pennsylvania even though the regulation does not take effect until 2022. I am pretty sure that is because IPM has perfect foresight and presumes that the affected power plants will act in their best interests knowing exactly what will happen in the future. That modeling assumption is wrong on so many levels that I could do a post just addressing the implications of that.
4: Limited Impact on Natural Gas Generation: Minor overall impact on natural gas generation with RGGI participation. The IPM modeling results for fuel consumption predicts that natural gas usage is projected to be smaller from 2022 to 2030 when Pennsylvania adopts RGGI. That runs counter to what I would expect. The only thing I can think of is that IPM thinks the added RGGI carbon tax will make Pennsylvania natural gas generation more expensive than power generated outside the state so imports will increase but that is a wild guess. The modeling does project lower regional energy use so that probably is the main reason.
5: PA Remains a Leading Energy Exporter: Updated modeling showing a smaller impact on exports due to RGGI participation. No comment.
6: Similar Minimal Impact on Electricity Prices Compared to Past Modeling: PA’s wholesale power prices are projected to be slightly higher in the policy case, as seen with the 2020 modeling. This does not account for future program investments, which can reduce prices. RGGI is a tax. The auction for allocations will generate money that can be used for “program investments” which proponents claim will reduce prices. If the past results from RGGI states is any guide, the benefits claims will be biased to ensure that there are cost savings. RGGI is supposed to be a GHG emission reduction program to save society from all the purported effects of the existential threat of climate change. In order to “prove” cost effectiveness, advocates use the social cost of carbon metric. Note however, that New York’s record of investments relative to the metric has been dismal. I have shown that the New York State Energy Research & Development Authority RGGI Status Report does not include a single program using auction proceeds that reduces carbon dioxide more cost efficiently than today’s social cost of carbon. In other words their programs are not cost-effective.
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The DEP website claims for RGGI emission reductions, health benefits, or economic benefits are not supported by the reported ICF model results. For one thing IPM modeling does not estimate health benefits and economic benefits and even though the model can estimate SO2 or NOx emissions no data was provided. While many questions cannot be answered by the very limited modeling results released by DEP, it is clear that their claims for CO2 emission reduction benefits are not supported by the results that are available to the public.
In addition, the modeling results indicate that most of the projected CO2 reductions will occur even if RGGI is not implemented. It is not clear if it is in the best interests of the state to impose a new tax and bureaucratic program with such poorly defined benefits.