Status of RGGI Third Program and Acadia Center RGGI Letter to State Officials

The Acadia Center recently sent me an email asking if I would sign a letter to State Officials regarding the Regional Greenhouse Gas Initiative (RGGI) Third Program Review.  That prompted me to prepare this article that summarizes the status of the Third Program Review and describes my response to the Acadia Center.

I am a retired air pollution meteorologist and worked on every cap-and-trade program affecting electric generating facilities in New York since 1990 including the Acid Rain Program, Regional Greenhouse Gas Initiative, and several Nitrogen Oxide programs since the inception of those programs. I also participated in RGGI Auction 41 and successfully won allowances which I held for several years. When I retired I started this blow where a regular topic is the RGGI cap and invest CO2 pollution control program.  The opinions I express 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. According to RGGI:

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia to cap and reduce power sector CO₂ emissions. 

RGGI is composed of individual CO₂ Budget Trading Programs in each participating state. Through independent regulations, based on the RGGI Model Rule, each state’s CO₂ Budget Trading Program limits emissions of CO₂ from electric power plants, issues CO₂ allowances and establishes participation in regional CO₂ allowance auctions.

The description of RGGI program review states:

The RGGI participating states are committed to comprehensive, periodic review of their CO₂ budget trading programs, to consider successes, impacts, and design elements (Program Review). The RGGI states completed the First Program Review in February 2013 and completed the Second Program Review in December 2017, resulting in the 2017 Model Rule.

On February 2, 2021, the RGGI states released a statement announcing the plan for the Third Program Review, and in Summer 2021 the states released a preliminary timeline for conducting the Third Program Review. In November 2022, the states released a Program Review Update which includes an updated Program Review timeline.

Last September RGGI hosted a public meeting as part of the process and discussed the following topics:

• Environmental Justice and Equity
• Program Elements for Consideration
• Electricity Sector Analysis

I prepared two articles after the meeting.   The first described the disconnect between the results of RGGI to date relative to the expectations in the RGGI Third Program Review modeling that I addressed in my comments to RGGI.  I followed up with another article that described the comments submitted at the time by others.  Aside from an announcement on May 21, 2024 that “The participating states in the Regional Greenhouse Gas Initiative (RGGI) released the RGGI CO₂ Emissions Dashboard on the RGGI website” there hasn’t been any other signs of progress on the program review process.

Acadia Center Draft Letter to RGGI

On May 22 I received an email that included the following:

I hope you’re doing well. I’m reaching out to ask for your support by signing onto another one of our RGGI letters, and this time we’re sending it to State Officials. The two-page letter aims to both ask for more information on the timeline on the Third Program Review and urge state officials to prioritize equity considerations in their decision-making processes for Third Program Review. Your signature would amplify our message and encourage your state officials to prioritize equity in their decision-making.

The draft letter is set up to go representatives in each of the RGGI states.  The New York draft is addressed to  Department of Environmental Conservation (DEC) Deputy Commissioner Jon Binder and the Chair of the New York Public Service Commission Rory Christian.  There are two requests in the letter.  Previous program reviews were completed much quicker than this one and included more collaborative opportunities between the States and stakeholders.  The first request asked, “when should we expect the RGGI states to take action to complete the Program Review?”  In the following discussion of my impression of the status of the program I will describe why I think this process is dragging but I certainly do not disagree with this request.  The second request in the letter is a request on the “need for the RGGI states to respond, from a substantive point of view to the comments you solicited, and we provided.”  I do not disagree with either sentiment.  The problem is that I don’t think they are able to respond to either one at this time as I will explain below.

My bigger issue with signing the letter is that I disagree with the following section of the letter:

Environmental justice and equity concerns for electricity ratepayers and frontline communities is notably the overarching issue that stands out among the many comments filed with the RGGI states. Of the various issues raised in the two rounds of 2023 program review stakeholder comments, 17 of the 38 filings from March and September mirror the language of the RGGI state’s initial Program Review announcement. They request that the RGGI states prioritize the needs of frontline communities.

The number of filings is only one piece of this story–it is also important to look at who filed comments. Multiple organizations signed on to comment letters. For example, the RGGI Advocates Coalition filing represents 18 organizations, while the Earthjustice et al. comments were signed by 16 organizations. Thus, an overwhelming majority of the organizations submitting 2023 program review filings urged the RGGI states to prioritize environmental justice-related issues in their program review. These issues and accompanying requests and recommendations include:

• Adopt a definition of “environmental justice”, a necessity for states that do not have one;  
• Set a percentage commitment of funds to allocate towards the RGGI ratepayers that have historically suffered from unfair treatment and disproportionate exposure to the harmful environmental conditions;
• Increase frontline community participation in decision-making and participation in investment planning;
• Address frontline community members’ exposure to poor air quality from criteria pollutants exacerbated by the electric generators covered by the program, and generators that are not yet covered by the program;
• Lower the 25 MW program threshold to include smaller generating units in the program;
• Expand air quality monitoring, particularly in disproportionately impacted areas at relevant levels of granularity
• Set a new cap that is in line with the States’ goals, we are in support of a cap that goes to zero by 2040.

Before addressing my specific issues with this section of the letter I will describe all the comments.

Impression of Comments

My article on the comments submitted to RGGI was published on November 7, 2023 but RGGI posted another tranche of comments on November 9, 2023.  I did not update my article to address the comments that came in after the requested submittal date.  I noted that the comments concentrated on particular aspects of the proposed revisions to the RGGI program.  My article categorized the first set of comments and I updated that summary of comments for this article.  In brief these were the major themes:

• Biomass Concerns – The Partnership for Public Policy and five individuals from Vermont complained about biomass power plants and the existing provision for “eligible” biomass to be treated as having zero emissions. 
• Emissions Traders – One emission trading company and the International Emissions Trading Association submitted comments that I believe have market implications that traders could exploit at the expense of everyone else.
• Support the Narrative – Five commenters including the Acadia Center agreed with the RGGI States suggestion to tighten the allowance caps and incorporate an environmental justice component. 
• Cashing in on Advocacy – One comment on behalf of seven organizations in Pennsylvania read like a mission statement for advocates hoping to cash in on RGGI auction proceeds.
• The Nature Conservancy comments were in a class by themselves.  They supported most of the issues raised in the Acadia Center letter but their support was based on naïve understanding of the issue.  They apparently have committed to offset projects that most environmental advocacy organizations do not accept.
• Industry Concerns – Four industry comments argued for caution in any proposed changes because the compliance success to date is threatened as the program goes into unprecedented levels of allowance supply relative to expected emissions.  Another important point made is that the technology necessary to eliminate fossil fuel electric generating units does not exist today so setting a zero-emissions target must consider technological feasibility.

I also submitted personal comments.  I described my comments in an earlier post.  I explained that I am afraid that the RGGI States are placing so much reliance on their analysis results that they could propose unrealistic allowance reduction trajectories.  It is naïve to treat any model projections of the future energy system without a good deal of skepticism because the electric grid is so complex and currently dependent upon dispatchable resources.  Replacement of RGGI-affected sources with intermittent and diffuse wind and solar resources that cannot be dispatched is an enormous challenge with likely unintended consequences.  Therefore, the modeling results should be considered relative to historical observations. 

Most advocates do not recognize that since the beginning of the RGGI program, RGGI funded control programs have been responsible for only 6.7% of the observed reductions.  My analyses indicate that most of the observed reductions of emissions are due to fuel switching from coal and residual oil to natural gas and that there are few opportunities for additional switching reductions in most RGGI States.  That means that future reductions are going to have to rely on displacing existing generator operations with zero-emission alternatives.  Ostensibly the auction revenues from RGGI are supposed to encourage development of those alternatives.  I have  found that when the sum of the RGGI investments is divided by the sum of the annual emission reductions the CO2 emission reduction efficiency is $927 per ton of CO2 reduced.  I think that the cost per ton reduced is too high to afford to develop the resources necessary for the reductions required to meet the aggressive allowance trajectories proposed.  In addition, as the allowances available go down either allowance prices will have to increase sharply or the revenues available for reduction investments will drop sharply.

My impression of the comments affect my response to the Acadia Center emphasis on equity portion of the draft letter to State Officials.  There is no question that many disadvantaged communities suffer disproportionate environmental impacts but it is important to understand what causes the harms and balance expectations and potential solutions. I agree that a definition of environmental justice for all RGGI states is needed  On the other hand, specific percentage commitment of funds is a problem for me because it will likely reduce the already poor effectiveness of investments to reduce emissions.  None of the RGGI states have a good record reducing emissions. The overall cost effectiveness of $927 per ton of CO2 reduced far exceeds the current Social Cost of Carbon.  Because fuel switching options to reduce emissions are just about tapped out, future emission reductions will only be possible when zero-emissions resources displace fossil plants.  The feasibility of that transition has never been proven and no jurisdictions have succeeded in that transition when depending upon wind and solar resources.  The recent New York technical conference that characterized the observed wind and solar resource cap and the resources necessary to address it conclusively show that existing technology is insufficient.

Another of the themes of the Acadia Center equit portion of the letter is to get the environmental justice communities more involved in the regulatory process: “Increase frontline community participation in decision-making and participation in investment planning”.  Electric and environmental resource planning is complex and there are reliability considerations that preclude some options that are endorsed by environmental justice advocates and the non-governmental organizations that provide them with technical support.  I certainly do not have an issue with their involvement but I do not see much value given their level of understanding.  Worse if it is impossible to accommodate all their demands the responses have not been constructive.

Environmental Justice advocates want to reduce “exposure to poor air quality from criteria pollutants exacerbated by the electric generators covered by the program, and generators that are not yet covered by the program”.  The New York City peaking power plant issue is a prime example of this concern and the disconnect between reality and activist demands.  Even though direct emissions from those plants comply with all existing environmental regulations and have dropped significantly over time, activists claim that they are the “most egregious energy-related example of what environmental injustice means today.”   Activists got a consultant to give them arguments to that effect and they have been promoting the issue ever since.  However, the presumption of egregious harm is based on selective choice of metrics, poor understanding of air quality health impacts, and ignorance of air quality trends.  In fact, analyses for the New York Cap-and-Investhave shown that was that the inhalable particulate emissions claimed as a particular problem are primarily from other sources based on the expanded air quality monitoring in disadvantaged communities.  Despite that finding the calls for shutdowns continue despite the fact that the organizations responsible for electric system reliability are on record saying that is unacceptable at this time.

Finally, the Acadia letter suggests setting a new cap that is in line with the States’ goals.   As noted previously this is problematic because the technology required is not available. 

Third Program Review Status

In my opinion the delays in the implementation of the Third Program Review recommendations are related to two problems: the participation of Virginia and Pennsylvania and the conflicting de-carbonization goals of the RGGI States.

The participation of Virginia and Pennsylvania has been mired down in politics and litigation.  Virginia is officially out currently but there is pending litigation to re-join.  Pennsylvania has never officially participated, and litigation is still holding back joining.  The problem is that both states have significant emissions and opportunities for further reductions.  In 2022, Virginia emissions were 23% of total RGGI emissions, Pennsylvania emissions were 27% of RGGI emissions including Virginia and 32% of total emissions excluding Virginia.  The allowance reduction trajectory feasibility depends on their participation so I suspect there is reluctance by the RGGI states to commit to something that will have to be scrapped if Virginia and Pennsylvania participation changes.

The other issue is that the de-carbonization goals of the RGGI states differ.  New York State has a law that mandates zero-carbon electric emissions by 2040.  Other states have different targets.  I believe that New York wants RGGI to comport with their mandate, but other states may not want to be so ambitious.  New York is setting up an economy-wide cap-and-invest program like RGGI but the latest version includes safety valves for reliability concerns.  I do not recall that the RGGI presentations have acknowledged that might be necessary so there is another controversy that must be resolved.

I am not surprised that the RGGI states have not been able to proceed with the Third Program Review.  I do not think it is possible to submit a letter that will accelerate the process given the complexity of the issues and all the uncertainties. The Acadia Center draft letter requested that the RGGI states to “respond, from a substantive point of view to the comments you solicited, and we provided.”  Given the wide range of possible outcomes and disparate interests of the states I do not think that they are able to respond to the comments now.

Conclusion

I agree with the concepts in the Acadia Center draft letter to State Officials.  An update on the status is overdue and responses to comments are appropriate.  However, I don’t think the status update is going to satisfy anyone because of all the uncertainties that preclude a firm schedule.   Until the differences between Virginia and Pennsylvania participation and RGGI state policy differences are reconciled it is impossible to respond to the proposed letter.  Therefore, I do not plan to sign the letter even if I am still welcome after this article is published.

My primary concern with RGGI relates to its ultimate goal of CO2 emissions reductions while maintaining a reliable and affordable electric system.  The Acadia Center letter and most of the comments were notable with respect to the motivations of the authors.  They mostly were at odds with the emission reduction goal.  There is a faction that despises a biomass facility in Vermont and commented on that.  Emissions traders support revisions to their advantage and not the rest of us.  One comment was a blatant marketing proposal to get money but it could be argued that many other commenters were doing the same thing just less obviously.

The RGGI state narrative now is to incorporate environmental justice considerations and comments supporting that were frequent.  In a recent post I addressed the tradeoffs between equity in a zero-sum approach relative to a positive-sum approach.  All the comments supporting environmental justice equity promoted the zero-sum approach with no recognition of potential unintended consequences.  I think the well-meaning emphasis on environmental justice is a problem because advocates are unduly pessimistic.  They ignore current environmental quality and improvements and focus on much smaller and less certain environmental risks all the while ignoring the benefits of a reliable electric system.