The Regional Greenhouse Gas Initiative (RGGI) is a carbon dioxide control program in the Northeastern United States. One aspect of the program is a program review that is a “comprehensive, periodic review of their CO2 budget trading programs, to consider successes, impacts, and design elements”. This article describes the first listening session of the third RGGI program review.
I have been involved in the RGGI program process since its inception. I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. 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.
Background
RGGI is a market-based program to reduce greenhouse gas emissions. It is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia to cap and reduce CO2 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.”
Proponents tout RGGI as a successful program because participating states have “cut carbon pollution from their power plants by more than half, improved public health by cutting dangerous air pollutants like soot and smog, invested more than $3 billion into their energy economies, and created tens of thousands of new job-years”. Others have pointed out that RGGI was not the driving factor for the observed emission reductions. My work supports that conclusion and points out that the cost-effectiveness of the investments from this carbon tax reduce CO2 emissions at a cost of $858 per ton which is far greater than the social cost of carbon metric. In other words, RGGI investments not a cost-effective way to reduce CO2 emissions.
Third Program Review Listening Session 5 October 2021
The slides for the listening session and the meeting recording for the listening session give a good overview of what is planned. Briefly the RGGI states are looking for input on the allowance cap, trajectory for changing the cap, allowance bank, compliance mechanisms and requirements, offsets, and “comment on how states can further address environmental justice and other equity concerns, including through program design and/or the use of RGGI auction proceeds to support underserved and/or otherwise affected communities.”
I posted an article that described my initial comments on the program review. My comments recommend making no changes. In the next few years, the RGGI allowance market will change to the unprecedented emissions trading situation in which the majority of the RGGI allowances are held by entities who purchased allowances for investment rather than compliance purposes. No one knows how the market will react and the compliance mechanisms are working well as is so there is no need to change anything at this time. I showed that RGGI investments only were directly responsible for less than 5% of the total observed reductions since RGGI began in 2009 the rest of the observed reductions occurred due to other factors, primarily fuel switching. Based on that observation, it appears to me that the goal of RGGI should be to balance the cap with emissions so that the allowance bank is only used for year-to-year variations in weather-related excess emissions. Over time it may become necessary to adjust the emission reduction trajectory but that should be based on observations and not model projections.
The 5 October 2021 listening session consisted of three parts. Presenters from RGGI and the RGGI states described the program and goals of the third program review in the first part. They allocated time for questions and answers about the process and goals. Finally, they offered stakeholders the opportunity to present oral comments. The remainder of this post addresses those comments.
Ten people presented appropriate comments. A couple of other people asked questions that were out of scope for the purpose of the meeting and I did not include their comments in this summary. I classified the commenters into five categories. The first category is “Little Green”. There were two of these grass roots advocacy organizations which are usually non-profits, have small staff, address limited local and regional issues, and have not been around for a long time. There were three commenters in the second category, “Green Analysis”. These are consultants that have technical staff available to analyze environmental issues and policies. The third category, “Green Legal”, had two commenters. These are organizations that have lawyers who address environmental legal issues. The fourth organization category is “Big Green”. Both the National Resources Defense Council and the Environmental Defense Fund made comments. These are large organizations that have advocates, scientists and lawyers, have been around for a long time and have large revenues and endowments. Finally, there is a category for organizations that commented on RGGI solely because they are interested in the money available. Only one commenter fit this description.
All of the commenters explicitly or implicitly claimed that RGGI has been a success. Most of the commenters managed to request that future emissions reductions be “equitable” and that investments from auction proceeds consider disadvantaged communities. Phelps Turner from the Conservation Law Foundation went so far as to suggest that 70% of the proceeds should be invested in disadvantaged communities.
Some commenters only addressed a single issue. Paul R. from a land trust in Rhode Island argued that RGGI funds should be allocated to organizations like his so that they can set-aside land for carbon sequestration. Laura H. from the Partnership for Policy Integrity wants the exclusion for biomass rescinded because the emissions from other pollutants than CO2 are high from these sources. Kai S from the Green Energy Consumers Alliance wants revisions to the voluntary renewable energy credit market. Nate B. from the Southern Environmental Law Center argued that vertically integrated utilities should be treated differently than non-regulated generating companies in the auction process.
Six of the commenters said that the emission caps should be tightened to reduce zero emissions by a date certain. For example, Drew Stilson, from the Environmental Defense Fund said that the RGGI emissions cap should be updated to be in line with “what the science says is necessary to avoid the worst impacts of climate change”. He said that emissions from the electricity sector must be reduced by “at least 80% by 2030” because it is critical in “achieving the Biden Administration’s commitment to a 50% reduction across the economy by 2030”. My impression is that most believe that RGGI state CO2 emissions should be zero by 2035.
Zero Emissions Trajectory
None of the commenters who advocated for a zero emissions cap by 2035 to satisfy a political target without any regulatory authority have any responsibilities for keeping the lights on. Easy for them to say and no personal consequences if their aspirational goals fail. It appears that the emotional need to meet this target because their selected science says it is necessary over rides the common-sense question whether such a target is feasible.
This section looks at an example zero-emissions cap by 2035. Based on the third program review timeline I don’t think a revised cap could be implemented before 2024 which is appropriate because that is the start of a new compliance period.
In my previous analysis I argued that continued fuel switching could produce zero-emissions from the more carbon intensive sources by 2030 so I calculated a linear reduction to zero out those emissions by 2030 from all but natural gas and “other fuel” sources. For the zero emissions trajectory for the remaining sources by 2035, I calculated a similar trajectory of reduced heat input from those fuels and estimated an emissions trajectory to zero by 2035. If RGGI were to make its emissions caps consistent with those trajectories then the total allocations from 2024 to 2035 cap would have to equal the cumulative emissions in the fuel source type trajectories over that period minus the allowance bank at the end of 2023. A revised cap that reduces the allowance bank and the allowance allocations is shown in the revised cap column of Table 1, Eleven-State RGGI Projected Emissions and Allowance Margin for Zero-Emissions By 2035 Scenario.
Feasibility of Zero-Emissions by 2035
In order to eliminate natural gas-powered generation, a total of 118,815,096 MMBtu of replacement energy must be found to displace its use every year between 2024 and 2035. Using the average of the last three years of EPA Clean Air Markets Division ratio data between heat input (MMBtu) and gross load (MWh) the natural gas displacement heat input is equivalent to 15,000,000 MWh. The average of the last three years energy output at the now retired Indian Point unit 3 was 8,594,967 or 57% of the displaced natural gas energy output. In 2020 New York had 1,985 MW of installed onshore wind energy that had a capacity factor of 25.2% and at that rate 6,780 MW (3.4 times) additional wind capacity would be needed to match the natural gas output. For new onshore wind with a capacity factor of 35% 4,881 MW per year of new generation would have to be built. Offshore wind with a capacity factor of 50% would only need to develop 3,417 MW but 8,543 MW of solar with a capacity factor of 20% would need 8,543 MW developed.
In addition, the generation from natural gas and nuclear is dispatchable so comparing the energy output between them is apples to apples. However, because wind or solar is not dispatchable a direct energy comparison is not appropriate which means that additional resource development and energy storage would also have to be included. A recent presentation by the New York State Reliability Council described how the New York electric system is operated to maintain reliability and some of the challenges presented when renewable energy sources are increased significantly. In my article on the presentation, I noted that the New York reserve margin will have to increase to over 100% relative to the current reserve margin of about 20%. In other words, in order to ensure that current reliability standards are maintained the amounts listed in the previous paragraph would have to be doubled.
Conclusion
In my initial comments to RGGI on the third program review I made the point that the most important planning consideration to keep in mind is that CO2 control is different than sulfur dioxide, nitrogen oxides and particulate matter because there are no cost-effective retrofit controls available for existing facilities. The data show that fuel switching has been the primary reason for the observed emission reductions in the RGGI states. Once the facility has changed to a lower emitting fuel the only options at a power plant are to become more efficient and burn less fuel or stop operating all together. While it is easy for the commenters to say that would be a good thing the reality is that the real impacts of a blackout caused by unavailable generating resources would be much greater than the alleged impacts of global warming. I concluded that if it ever comes to the point that allowances are unavailable to operate that could threaten reliability, so it is imperative that RGGI never tighten the cap so low that affected sources are unable to operate due to unavailable allowances.
With respect to the comments demanding that a zero-emissions trajectory by a certain date it is clear that they are ignoring the performance of RGGI to date. In my initial comments I showed that the RGGI investments to date are only directly responsible for less than 5% of the total observed reductions since RGGI began in 2009. Also note that the cumulative annual RGGI investments are $2,795,539,789 and that means that the cost per ton reduced is $857.74. If the RGGI states have to rely on RGGI investments to make the annual 7,143,044 ton reduction needed, that cost per ton rate would mean an annual cost of $6.1 billion.
As the RGGI states embark on another program review process I hope that they will ignore the calls for emission caps consistent with an aspirational emissions reductions target. It is also important that they consider the actual results of the program to date. The fact is that any emissions trading approach for CO2 has to acknowledge that there are limited options for cost-effective reductions and that most of the observed RGGI state reductions have not been due to the RGGI program. Because of the limited options available and relative ineffectiveness of RGGI investments it is absurd to establish the future emissions caps based on zero emissions by 2035. That could only lead to reliability issues when affected sources run out of allowances to operate but are still needed to run to keep the lights on.
Pragmatic Environmentalist of New York 