Category: Regional Greenhouse Gas Initiative

I have regularly prepared updates on the Regional Greenhouse Gas Initiative (RGGI) annual Investments of Proceeds report.  Last year I combined the update with lessons to be learned concerning the relative emission reduction effectiveness of the different investments categories used in the reports.  This post updates my past summaries and summarizes the implications relative to the recently completed Third Program Review.

Dealing with the RGGI regulatory and political landscapes is challenging enough that affected entities seldom see value in speaking out about fundamental issues associated with the program.  I have been involved in the RGGI program process since its inception and have no such restrictions when writing about the details of the RGGI program.  I have worked on every cap-and-trade program affecting electric generating facilities in New York including RGGI, the Acid Rain Program, and several Nitrogen Oxide programs, since the inception of those programs. I also participated in RGGI Auction 41 successfully winning allowances and holding them for several years.   The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions (GHG) (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 but has since withdrawn, and Pennsylvania has joined but is not actively participating in auctions due to on-going litigation. According to a RGGI website:

The RGGI states issue CO2 allowances that are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs.

Proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation, and direct bill assistance. Energy efficiency continued to receive the largest share of investments.

Despite claims about the success of RGGI, the reality is that the only thing it is good at is raising money.  Suggestions that RGGI has been responsible for the observed reductions in CO2 emissions over the life of the program ignore the importance of fuel switching and the poor performance of RGGI auction proceed investments in reducing emissions.  I document these  observations below.

Proceeds Investment Report

The 2023 investment proceeds report was released on July 16, 2025.  According to the press release: “In 2023, $852 million in RGGI proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement, and direct bill assistance. Over their lifetime, these 2023 investments are projected to provide participating households and businesses with $2.7 billion in energy bill savings and avoid the emission of 7.8 million short tons of CO2.”  The report breaks down the investments into major categories.  The 2023 investment report explains:

Energy efficiency makes up 64% of 2023 RGGI investments and 56% of cumulative investments. Programs funded by these investments in 2023 are expected to return about $1.9 billion in lifetime energy bill savings to more than 181,000 participating households and 1,083 businesses in the region and avoid the release of 5.3 million short tons of CO2.

Clean and renewable energy makes up 6% of 2023 RGGI investments and 12% of cumulative investments. RGGI investments in these technologies in 2023 are expected to return over $647 million in lifetime energy bill savings and avoid the release of more than 1.9 million short tons of CO2.

Beneficial electrification makes up 9% of 2023 RGGI investments 4% of cumulative investments. RGGI investments in beneficial electrification in 2023 are expected to avoid the release of 436,000 short tons of CO2 and return over $94 million in lifetime savings.

Greenhouse gas abatement and climate change adaptation makes up 2% of 2023 RGGI investments and 7% of cumulative investments. RGGI investments in greenhouse gas (GHG) abatement and climate change adaptation (CCA) in 2023 are expected to avoid the release of more than 49,000 short tons of CO2.

Direct bill assistance makes up 15% of 2023 RGGI investments and 15% of cumulative investments. Direct bill assistance programs funded through RGGI in 2023 have returned over $128 million in credits or assistance to consumers.

This official story about the virtues of RGGI investments does not square with reality.

Emission Reductions

All my summaries of the RGGI Investment Proceeds reports have found the same results.  Since the beginning of the RGGI program, RGGI funded control programs have been responsible for a small fraction of the observed reductions – only 7.6% in 2023 (Table 1).  The primary reason for the observed reductions has been fuel switching away from coal and oil to natural gas.  Importantly, the availability of potential fuel switching in the RGGI fleet of electric generating units is running out.  Consequently, future reductions will have to rely on the deployment of zero-emission generating resources and load reductions which makes cost-effective emission investments important. 

Table 1: State-Level CO2 Emissions for Nine RGGI States 2009 to 2024

The importance of cost-effective investments for emission reductions is unacknowledged.  I calculate cost effectiveness by dividing the RGGI total investments divided by the estimated avoided CO2 emissions. In 2022 the CO2 emission reduction efficiency was $949 per ton of CO2 reduced but in 2023 the cost per ton reduced increased to $1,854.  Because there is no obvious change in investment strategies, I think the differences are due to changes in the calculation methodology.  This cannot be confirmed because there is insufficient documentation.

Table 2: Accumulated Annual RGGI Proceeds, Avoided CO2, and Cost Efficiency

Emission Reduction Costs

RGGI is supposed to be an emissions reduction program.  On July 3, 2025, RGGI announced the results of the Third Program Review that modified the requirements for future reductions.  Based on my analysis of the planned revisions, the RGGI States only delayed the inevitable reckoning of the futility of this program to achieve the goal of a “zero-emissions” electric system.  The RGGI summary  of the revisions states that the revised mandated reductions will “decline by an average of 8,538,789 tons per year, which is approximately 10.5% of the 2025 budget” from 2027 to 2033.

Table 3 lists the cost per ton of CO2 removed of the RGGI investments from 2015 to 2023, the cost to reduce 8,538,789 tons per year using their observed costs, and the RGGI proceeds for each year.  In 2023 the Third Program Review mandated annual emission reduction multiplied by the cost per ton ($1,854) totals $15.8 billion but the RGGI proceeds were only $0.85 billion.  Even using the cost over the entire period of $849 per ton, it would cost $7.25 billion to make the reductions mandated.  This is still far short of the proceeds available.

Table 3: Annual RGGI Cost Efficiency, Cost to Meet 2027 RGGI Annual Reduction, and Annual Proceeds

Investment of Proceeds Summary

The 2023 investment proceeds report breaks down the investments into major categories. I added the annual values for each category to provide the following summary (Table 4).  Note that the overall cost effectiveness is $1,174 per ton avoided.  Clearly the proceed investment strategy is not emphasizing emission reduction effectiveness.  It is encouraging that savings of $924 million are claimed but total investments are $2,251 million.   In my opinion, these numbers are inconsistent with claims that RGGI is successful.

Table 4: RGGI Proceeds Report Investment Category Annual Totals

Cost Effectiveness Implications

One of my big concerns about any cost on carbon emissions is that it is a regressive stealth tax on energy.  There is a tradeoff between trying to minimize those impacts and reducing emissions.  In the last six years $371 million or 16% of the RGGI auction proceeds went to direct bill assistance, which is good but that means that much less was available to reduce emissions (Table 5).  Throw in the $132 million over the last 6 years for administration that means that 23% of the RGGI auction proceeds were not used to reduce emissions.

Table 5: Summary of Recent RGGI Categorial Investments and Avoided Emissions Over the Last 6 Years

This article compares the cost effectiveness of emission reductions for the following investment categories: energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation (Table 3).  For the investment categories that provided emission reductions Clean and Renewable Energy was the most effective way to reduce emissions.  As far as I can tell this category provides the most funding for projects that directly reduce emissions.  It is encouraging that the energy efficiency is right around the average over all categories.  This means that energy efficiency programs targeted at low- and middle-income households most affected by this energy tax will provide effective emission reductions but only at a cost near $1,000 per ton. 

On the other hand, programs promoting the research and development of GHG abatement and climate change adaptation are less effective at reducing emissions.  Perhaps a greater emphasis on programs promoting reduction of emissions in the power generation sector and advanced energy technologies and less emphasis on programs for the reduction of vehicle miles traveled, tree-planting projects designed to increase carbon sequestration, and climate adaptation and community preparedness initiatives would improve emission reduction efforts consistent with the emission reduction goal of RGGI.

The worst emission reduction programs are associated with beneficial electrification that are “designed to reduce fossil fuel consumption by implementing or facilitating fuel-switching to replace direct fossil fuel use with electric power.“  This category was added recently.  There are two ways to look at the high numbers.  On one hand, it could be that it recognizes that reductions of overall fossil fuel consumption require efforts across all sectors.  On the other hand, I think it inappropriately transfers costs to the electric sector that do not provide efficient emission reductions.

Discussion

As noted previously, since the beginning of the RGGI program RGGI funded control programs have been responsible for a small fraction of the observed reductions (e.g., only 7.6% in 2023).  The primary reason for the observed reductions has been fuel switching away from coal and oil to natural gas. There are limited opportunities to make further fuel switching changes.   Consequently, future reductions will have to rely on the deployment of zero-emission generating resources.  This means that compliance with the RGGI emission caps is out of the control of the affected generating units and that RGGI investments must fund much of the reductions needed.

New York’s Value of Carbon guidance estimates that the 2025 cost of carbon at a 2% discount rate is $133.75.  Per this guidance, when used for a damages-based approach to valuing greenhouse gas emissions, the value of carbon provides a monetary estimate of the impacts on society from activities that are a source of greenhouse gas emissions. The estimated emission reductions cost per ton removed exceeds that limit for every year and every investment category.  This suggests that the emission reduction costs exceed the societal benefits expected.

The ostensible purpose of RGGI is to reduce emissions.  In theory the auction proceeds would be invested to facilitate emission reduction programs but categorial investments do not reflect that as a priority.  The beneficial electrification category is the worst.  It illustrates the tendency for government funding priorities to shift away from the original priorities of the program.

The RGGI funding priorities do not reflect the necessary funding required to meet the annual reduction mandates in the recently approved Third Program Review modifications. Using the future mandated emission reduction and the observed 2023 reduction efficiency (8,538,789 tons multiplied by the cost per ton $1,854) totals $15.8 billion.  However, the RGGI proceeds in 2023 were only $0.85 billion.   These results show that RGGI investments will not provide the emission reductions mandated.  That leaves the question – where will the reductions come from?

Conclusion

These results support my conclusion that RGGI can only claim to raise money effectively.  Claims that RGGI is a successful emission reduction program are inconsistent with the following observations.  The investment costs exceed the expected societal benefits.  The amount raised falls far short of the funds necessary to reduce RGGI emissions in accordance with Third Program Review requirements.   Investment priorities are inconsistent with the emission reduction objectives.  Finally, emission reductions associated with RGGI investments only account for 7.6% of the observed reductions.

Someday, the shortcomings of the RGGI approach will result in serious problems. When the only compliance option available to generating plants is to reduce operations, then an artificial energy shortage will result. 

The Regional Greenhouse Gas Initiative (RGGI) is a market-based program to reduce CO2 emissions from electric generating units.  One aspect of RGGI is a regular review of the program status and need for adjustments.  On July 3, 2025, RGGI announced that results of the Third Program Review.  Based on my analysis of the planned revisions, the RGGI States only delayed the inevitable reckoning of the futility of this program to achieve the goal of a “zero-emissions” electric system.

Dealing with the RGGI regulatory and political landscapes is challenging enough that affected entities seldom see value in speaking out about fundamental issues associated with the program.  I have been involved in the RGGI program process since its inception and have no such restrictions when writing about the details of the RGGI program.  I have worked on every cap-and-trade program affecting electric generating facilities in New York including RGGI, the Acid Rain Program, and several Nitrogen Oxide programs, since the inception of those programs. I also participated in RGGI Auction 41 successfully winning allowances and holding them for several years.   The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions (GHG) (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 but has since withdrawn, and Pennsylvania has joined but is not actively participating in auctions due to on-going litigation. According to a RGGI website:

The RGGI states issue CO2 allowances that are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs.

Proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation, and direct bill assistance. Energy efficiency continued to receive the largest share of investments.

The RGGI States regularly review successes, impacts, and design elements of the program.  This is the third iteration of the review program.  It started in February 2021 and finally was completed in June 2025, years behind schedule.

I was an active participant in the program review.  I described my initial comments in October 2023 addressing the disconnect between the results of RGGI to date relative to the expectations in the RGGI Third Program Review modeling.  Last October I submitted more comments as described here.  I also described other comments submitted to RGGI.

Third Program Review Summary

The RGGI summary of the program review changes states:

The 10 states participating in the Regional Greenhouse Gas Initiative (RGGI) have agreed to strengthen their regional carbon dioxide (CO₂) emissions cap through 2037, starting in 2027, and establish new mechanisms to protect energy affordability. These updates will ensure the longstanding bipartisan initiative’s continued success in promoting clean air, health and economic benefits across the region. States also agreed to launch their next Program Review no later than 2028, as part of their commitment to regularly evaluate their CO₂ budget trading programs. The next Program Review will consider factors such as changes in energy policy, the pace and scale of electricity load growth, progress in clean energy deployment, and ongoing efforts to ensure energy affordability.

The updates are designed to:

• Provide stability and certainty to market participants, including power producers who purchase allowances to match their emissions and developers of new electricity generation resources.
• Ensure access to sufficient RGGI allowances to meet expected energy demand and bolster price protection for consumers. RGGI states will continue to invest the proceeds from those allowances into programs that lower electricity bills and provide economic benefits to local communities, including energy efficiency, renewable energy, and bill assistance programs.
• Confirm states’ long-term commitments to energy affordability, public health, and the environment, maintaining an economic climate in which innovative companies and the region’s workforce thrive.

Changes to the Allowance Allocation Budget

The allocation budget sets the limits on future emissions. Strengthening the cap means reducing the allocations. The RGGI summary describes the changes to the budget:

The updated Model Rule reduces the regional emissions cap in 2027 to 69,806,919 tons of CO₂ from 75,717,784 tons under the previous Model Rule (Figure 1). Allowances decline by an average of 8,538,789 tons per year, which is approximately 10.5% of the 2025 budget, thereafter through 2033. Then, from 2034 through 2037 the cap will decline by 2,386,204 tons of CO₂ annually, which is approximately 3% of the 2025 budget. Subsequent years are set to match the 2037 emissions cap. No adjustments are made to banked allowances, which continue to be available for compliance.  (As of July 2025, the estimated bank of privately held allowances more than RGGI compliance obligations is around 67 million tons.) Setting the regional cap beyond 2037 will be addressed in the next RGGI Program Review, to begin no later than 2028.

This figure compares the current regional base cap (light blue) with the updated cap trajectory (dark blue). The orange and yellow lines display the total updated regional cap if all allowances are released from the updated first and second Cost Containment Reserve (CCR)  tiers, respectively.

This figure compares the current regional base cap (light blue) with the updated cap trajectory (dark blue). The orange and yellow lines display the total updated regional cap if all allowances are released from the updated first and second Cost Containment Reserve tiers, respectively.

The two-tiered CCRs is another revision in the Third Program Review. The CCR is a reserve of allowances that is released if costs exceed certain limits.   In my comments on the draft revisions, I argued that the biggest issue is how the allowances allocated for the annual caps and the bank of already allocated allowances held compared with actual emissions.  Environmental activists demand that the allowance cap “bind” emissions to ensure that the reductions occur on their preferred arbitrary trajectory.  They don’t understand that a binding cap will limit emissions even if the zero-emissions resources are not available to displace the existing emissions.  The ramifications of that situation are enormous.  In the worst case, an electric generating unit needed to keep the lights on will refuse to operate because they have insufficient allowances.  The two-tier CCR resolves this problem for a while anyway.

Table 1 quantifies the allowance allocations for the Policy Update, the Current Program and includes the allowance bank from the RGGI Secondary Market Monitoring Report.  Note that trying to figure out the allowance allocations is a non-trivial task so I relied on a Perplexity AI search.  The numbers do not match but for my purposes that is not a concern. One of the controversial topics during the Third Program Review was the acceptable size of the allowance bank.  Activists without any compliance responsibilities think the bank should be zero.  Regulated entities and the regulators recognize that the bank is required because it represents current compliance obligations, a safety margin for extreme weather conditions, and that non-compliance entities own a significant share of the bank.  The regulators and the regulated entities argue about the size of the bank but not its necessity.  There is another important aspect of the bank.  Regulated entities generally purchase allowances as needed and keep their banked allowances at a fixed percentage of expected emissions.  In other words, there is no nefarious reason for the bank.

Table 1: RGGI Allowance Allocations 2015- 2040 and Recent Allowance Bank

Table 2 compares recent emissions to the Current Program allowance allocations and the Policy Update allowance allocations.  The observed emission trend since 2015 is affected by the addition of New Jersey and Virginia to the program so I included the emissions without Virginia.  Note that there is quite a bit of interannual variation and an increase in emissions between 2019 and 2022.  The increase in emissions was affected by New York’s idiotic shutdown of 2,000 MW of zero-emissions nuclear power.  The takeaway from this is that since 2015 there hasn’t been any major reduction in emissions despite RGGI investments and Federal subsidies. 

Table 2: RGGI Emissions and Allowance Allocations 2015 – 2040

In 2027 the Policy Update mandates a 20% reduction in the allowance allocated.  Initially that could be covered by dipping into the allowance bank, but eventually existing fossil generation must be displaced by zero-emissions resources. My back of the envelope estimate is that 2.8 GW of solar, 2.4 GW of onshore wind, and 1.2 GW of offshore wind would have to come online to displace the fossil emissions necessary to meet the 2027 allowance allocation decrease.  The other alternative is that compliance entities will compete to buy allowances necessary for compliance and trigger a price increase that will kick in the Cost Containment Reserve which will provide enough allowances for compliance.  As the Policy Update steep reduction requirements continue eventually the second Cost Containment Reserve will kick in.  Inevitably, there will come a time when the only viable control option is for zero-emission resources to displace the fossil units to meet the compliance requirements.  In my opinion, the reduction trajectory was based on meeting aspirational targets in the Climate Act and other state’s programs rather than a feasibility projection of what could reasonably be implemented.

Discussion

Cap-and-invest programs like RGGI are frequently touted as a program that will kill two birds with one stone: “It simultaneously puts a limit on the tons of pollution companies can emit — ‘cap’ — while making them pay for each ton, funding projects to help move the jurisdiction away from polluting energy sources — ‘invest.'”  That is the theory and RGGI is the experiment.

The RGGI experiment is getting more complicated which I think accounts for the long delay finalizing the policy update.  The changes to the participating states was a major reason for the delay. A reasonable allowance reduction trajectory when Virginia or Pennsylvania was in the program will not be reasonable when either state is not in the program because their emissions are large and there is more opportunity for fuel switching reductions.  When you consider the conflicting reduction goals of the states the challenge of an acceptable consensus becomes very difficult.

The RGGI Policy updates were designed to support three goals.  Firstly, “Provide stability and certainty to market participants”.  The power producers now know when it is unlikely that there will be sufficient allowances for fossil units to continue to operate like they currently do.  My bet is 2032 when the allowances allocated in the Policy Update plus both CCR allocations will be 30% less than current emissions because I do not think that there will be sufficient zero emission renewable resources developed by then.  The second goal was to “Ensure access to sufficient RGGI allowances to meet expected energy demand and bolster price protection for consumers.”  The Policy Update provides access for now.  They have punted accountability for this goal, and I bet that by 2032 the goal will be unattainable.  The final goal is “long-term commitments to energy affordability, public health, and the environment, maintaining an economic climate in which innovative companies and the region’s workforce thrive”.  This is just a marketing slogan.

Late last year I published an article that documented that RGGI performance to date,  The results are not promising.  The RGGI States claim that they will continue to “invest the proceeds from allowances into programs that lower electricity bills and provide economic benefits to local communities, including energy efficiency, renewable energy, and bill assistance programs.”  Given that recent Federal legislation is cutting subsidies to renewable development the priorities of proceed investments needs to be revisited.  While bill assistance programs are necessary to reduce impacts to those least able to afford the RGGI carbon tax, the observed performance of RGGI emission reduction investments for energy efficiency and renewable energy projects has not been good enough to expect that the ambitious emission reduction targets can be achieved using RGGI proceeds.

Ultimately, I am convinced that no GHG emission reduction cap-and-invest program will succeed.  Danny Cullenward and David Victor’s book Making Climate Policy Work explains why.    They note that the level of expenditures needed to implement the net-zero transition vastly exceeds the “funds that can be readily appropriated from market mechanisms”.  Even though RGGI allowance prices will increase significantly, they still will be insufficient to fund the necessary development of zero emission resources.  Note that when the allocations go down the proceed will drop too.  I intend to follow up this post with another specifically addressing auction price ramifications.

Conclusion

The Third Program Review Policy Update features an allowance allocation schedule that is consistent with RGGI State net-zero regulations.  That trajectory is inconsistent with wind and solar deployment history and reasonable expectations.  As a result, there eventually will be insufficient allowances available for CO2 emitting generation resources to operate.  The use of a CCR and addition of a second CCR will delay the inevitable reckoning but in less than ten years I expect that RGGI will need to be abandoned as a feasible emission reduction strategy.

The Regional Greenhouse Gas Initiative (RGGI) is a market-based program to reduce emissions from electric generating units.  One aspect of RGGI is a regular review of the program status and need for adjustments.  This article describes my latest comments on the Third Program Review process.

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.   I submitted comments on the Climate Act implementation plan and have written over 450 articles about New York’s net-zero transition because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions (GHG) (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 but has since withdrawn, and Pennsylvania has joined but is not actively participating in auctions due to on-going litigation. According to a RGGI website:

The RGGI states issue CO2 allowances that are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs.

Proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation, and direct bill assistance. Energy efficiency continued to receive the largest share of investments.

The RGGI States regularly review successes, impacts, and design elements of the program.  This is the third iteration of the review program.  It started in February 2021 and there is no schedule for its completion.  The description states:

To support the Third Program Review, the states will:

• Conduct technical analyses, including electricity sector modeling, to inform decision-making related to core Program Review topics, such as the regional CO₂ emission cap.
• Solicit input from communities, affected groups, and the general public on the Program Review process and timeline, core topics and objectives, modeling assumptions and results, and other policy and design considerations.
• Convene independent learning sessions with experts and other interested parties on key design elements.

I have previously posted an article describing my earlier comments to RGGI addressing the disconnect between the results of RGGI to date relative to the expectations in the RGGI Third Program Review modeling.  I have also described other comments submitted to RGGI.

The overarching problem with GHG emission market-based programs is that carbon dioxide emissions are directly tied to fossil-fuel combustion and energy production.  If for any number of reasons, the zero-emissions are not deployed fast enough there won’t be enough credits within the cap available to cover the emissions necessary to provide the energy needs.  In the worst case, an electric generating unit needed to keep the lights on will refuse to operate because they have insufficient allowances. I do not think that this program review pays sufficient attention to this problem.

The Program Review Update describes the September 23, 2024 update.  There are two distinct components to this update: the release of another modeling scenario and a request for suggestions on how to accommodate other states without upsetting the “environmental ambition” of the states currently participating in RGGI.

IPM Emission Modeling Comments

The basis of the RGGI state program review proposal is modeling done by ICF using the Integrated Planning Model (IPM).  There is not much documentation for the IPM analysis.  The Program Review Update is the only documentation and that consists of “informational slides”.  The “detailed modeling results” are presented in a spreadsheet that does not include a table with explanations of the data provided.  Even though I have reviewed every previous iteration of RGGI IPM modeling results, I had to spend a lot of time trying to decipher what they were doing.  If someone decided to review the modeling analysis without any experience, they would have a very hard time trying to figure out what is going on.  I do not think this lack of documentation is appropriate.

The presentation slides note that “The RGGI states have conducted modeling analysis of an additional exploratory policy scenario”.  In this type of analysis, the policy scenario results are compared to a base case or business as usual scenario. Two cap scenarios were modeled:

• Flat Cap Scenario consistent with current program design
• Exploratory Policy Scenario with an increased reserve price, declining cap to 2037 and a new two-tier CCR.

Results from two cases of the “Exploratory Policy Scenario” are presented in the spreadsheet.  Case A includes “currently contracted renewables only” and Case B includes “on-the-books policies and mandates”.  The Flat Cap Scenario includes on-the-book policies and mandates and the exploratory scenario projects what would happen with the policy changes.  The documentation also notes that renewable cost data has been updated to align with NREL’s 2024 release of the Annual Technology Baseline dataset.  I believe that the updated data were different enough that it was appropriate to do a new current program design base case, i.e., the Flat Cap Scenario. 

I have reservations about the analysis because the IPM projected emissions in 2028 are not credible.  Table 1 lists the observed EPA Clean Air Markets Division annual CO2 emissions for the last three years and the Integrated Planning Model (IPM) projected 2028 emissions for the three modeling scenarios from the results spreadsheet.  IPM projects an overall reduction of more than 50% in four years for Case A  I believe that the analysis over-estimates potential CO2 reductions in the ten RGGI states.  Reductions in this time frame can only occur when wind and solar resources displace the RGGI source generation. My first impression is that it is unlikely that enough wind and solar can be built in that time frame.

Table 1: Comparison of Observed RGGI CO2 Emissions and IPM Projected Emissions (million tons)

Modeling scenario Case A includes “currently contracted renewables only and Case B, used in the Flat case, includes “on-the-books policies and mandates”.  I do not believe that the modeling addresses the fact that renewable rollouts are not going according to contracted renewable plans.  The New York Department of Public Service (DPS) Case Number: 15-E-0302,: Proceeding on Motion of the Commission to Implement a Large-Scale Renewable Program and a Clean Energy Standard recently asked for comments on the DPS staff and the New York State Energy Research and Development Authority’s (NYSERDA) July 1, 2024, filing of the Draft Clean Energy Standard Biennial Review.  Comments submitted by EDF Renewables noted that:

Reflecting on Sections 4 and 5 of the Draft Review with a look at the current state of contracted

renewables and the path to achieving the 70% Goal:

• Out of 156 RES Tier 1 projects that have been awarded, approved, or are pending approval by NYSERDA since 2004, 30 are operational and 23 are still under development.
• 11 of 25 land‐based wind projects are operational and 9 of 116 solar projects are operational. Operational projects have added 1,016 MW of capacity, 821 MW of which are land based wind projects.

11,000 MW of capacity has been cancelled or is still under development.

The Draft Clean Energy Standard Biennial Review itself acknowledged this problem.  It concludes that New York’s Climate Leadership & Community Protection Act 70% renewable energy by 2030 target will not be met until 2033.  The Biennial Review notes:

New York’s progress has been and will continue to be affected by conditions in the larger global markets.  The complex renewable energy supply chain is a global network of materials procurement, processing, production, materials recovery, infrastructure, and logistics operations. As the United States and other nations raise their goals for emission reductions, those supply chains are stressed. Geopolitical tensions and policies incentivizing domestic production of major energy generation equipment also impact the cost and availability of materials and components. High interest rates and inflation – which were prevalent from mid-2021 through mid-2023 across the renewable energy supply chain – also play a role in raising the baseline for renewable energy input prices. While such prices have recently stabilized, input prices are higher than what was forecasted prior to the 2021-2023 inflationary period.

The IPM modeling does not address this reality.  In the absence of documentation citing just how much solar PV, onshore wind, and offshore wind resources were assumed to be deployed in the RGGI IPM modeling analysis I made my own estimate.

My projection of necessary renewable energy is based on evaluation of historical emissions data.  Table 2 lists the observed annual CO2 emissions from the ten-state RGGI region from the EPA Clean Air Markets Division (CAMD) database.  Details on the methodology are available in my comments, a supplementary attachment, and a spreadsheet that describes the analysis details.  Note that there has been a significant drop in CO2 emissions in the RGGI region, but a large portion of those reductions were due to fuel switching from coal and oil to natural gas and retirements of fossil-fired units.  Importantly, the opportunity for further fuel switching reductions is small.  This is the basis for my assertion that most future emission reductions must come from reduced operations at existing fossil-fired power plants due to displacement by renewable deployments. 

Table 2: 10-State EPA CAMD All Program Annual CO2 Emissions by Fuel Type

I used these data and the IPM modeling results to make a projection out to 2028.  I assumed the coal, oil, and other fuel types would go to zero by 2028 and that natural gas emissions equal the emissions projected by IPM in 2028.  I also used these data to project renewable requirements. I used the EPA load data and emissions to calculate the load per ton of CO2 for each fuel type.  I used those parameters to estimate the load associated with the IPM projected emissions in 2028.

In Table 3 I list the estimated renewable displacement load (MWh) value for each scenario.  At the top of the tables, the fossil fired generation load that must be displaced by renewable energy is listed.  For example, 88,630,916 MWh is the amount in the Case A, Exploratory Policy Scenario.  I determined the relative contributions of solar PV, onshore wind, and offshore wind based on results in the IPM modeling spreadsheet.  Those percentages were multiplied by the total load that renewables must displace to estimate how much each type would be needed  I assumed some conservatively high capacity factors for the renewable resources and calculated the capacity (MW) of each resource.  In my opinion, there is very little chance that these levels of solar PV, onshore wind and offshore wind can be deployed by 2028 because of the problems noted in the Biennial Review.

Table 3: Estimated Renewable Deployment Necessary to Achieve IPM RGGI 2028 Emissions

There are other potential problems that could have bigger ramifications.  IPM integrates “wholesale power, system reliability, environmental constraints, fuel choice, transmission, capacity expansion, and all key operational elements of generators on the power grid in a linear optimization framework”.  I think that the optimization process presumes that wind and solar resources can be freely substituted for other dispatchable resources in its estimates of the future electric power system.  However, wind and solar resources are not dispatchable.  It is not clear whether the IPM approach is appropriate for an electric system that has a large renewable component.

Furthermore, I do not know how IPM handles weather dependency of wind and solar in its projections.  My back-of-the-envelope projection for renewable generation necessary to displace fossil fueled resource generation assumes that the replacement is on a one for one MWh basis.  Presently, wind and solar generation is dispatched first because there is no fuel cost.  Fossil resources are being used more and more only as backup when wind and solar is unavailable.  As a result, wind and solar resources displace less and less fossil, as more resources are added.  For example, fossil support for solar resources can never be eliminated at night.  The same holds true for wind because there is a significant correlation of wind facilities across large areas.  For example, on 9/13/2024 at hour 1200 the New York Independent System Operator (NYISO) real-time fuel mix generation from over 2,500 MW of wind capacity across the state, including an offshore wind facility, was zero. 

To accurately project future fossil generation in an electric grid with increasing amounts of intermittent wind and solar, dispatchability and weather dependency must be incorporated.  I understand that the NYISO resource planners use historical meteorological data and associated wind and solar output to account for weather dependency and their resource planning approach incorporates dispatchability concerns.  If IPM does not address this issue correctly, then the results for the future projections have little value and should not be relied on to make future predictions of the RGGI electric system. It would be prudent to compare the IPM modeling results with the projections for future resources developed by regional transmission operators in the region before completing the Third Program review process.

Allowance Price Modeling Comments

One of the key outputs in the Program Design modeling is the price of allowances.  As described in my comments I am not enamored of the ability of the IPM analysis to project allowance prices.  The documentation notes that IPM considers “long-term fundamentals, generation assumptions & costs, economic growth forecast, and government policies.”  I think this is a fatal flaw of the approach because the model has no way to incorporate uncertainty, and the model has perfect foresight.  This is a problem in the first place because the assumptions used for the considerations are subject to change. For example, cost predictions necessarily are affected by future rates of inflation, and no one predicted the recent large changes.  Secondly, these considerations introduce significant uncertainties that affect the deployment of the renewable resources necessary to displace fossil generating units and reduce their emissions.  This in turn affects the scarcity of allowances relative to emissions and that affects allowance prices.   As shown earlier, there are limited remaining opportunities to switch fuels so any delays in renewable deployment will affect future emissions and allowance prices.  The IPM allowance modeling estimates cannot handle these uncertainties, so they are little more than educated guesses.   

Modeling Scenario Comment Conclusion

Given the enormous uncertainties of the transition to zero-emissions in the RGGI states it would be prudent to address this issue directly.  I commend the states for proposing a two-tier CCR solution that, depending on how it is implemented, could deal with the problem simply. 

RGGI has already adopted the Cost Containment Reserve (CCR).  The CCR established a “quantity of allowances in addition to the cap which are held in reserve.”  If allowance prices exceed predefined price levels, these allowances are sold. The CCR is replenished at the start of each calendar year.

Table 4 lists CCR and trigger prices over time.  Note that the March 13, 2024 allowance auction clearing price was $16.00 so the CCR allocation was completely used up.  In the most recent auction, the clearing price was $25.75 which exceeds the 2030 trigger price.  In the two-tier approach another set-aside of allowances will be available for sale in an auction if the price exceeds the second trigger.

Table 4: RGGI Cost Containment Reserve

The ultimate issue is how the allowances allocated for the annual caps compare and the bank of already allocated allowances held compare with actual emissions.  Environmental activists demand that the allowance cap “bind” emissions to ensure that the reductions occur on their arbitrary trajectory.  They don’t accept that a binding cap will limit emissions even if the zero-emissions resources are not available to displace the existing emissions and that the ramifications of that situation are enormous.  In the worst case, an electric generating unit needed to keep the lights on will refuse to operate because they have insufficient allowances.  The two-tier CCR resolves this problem.

Response to “Environmental Ambition” Questions

The second component notes that: “The RGGI states are interested in exploring potential market solutions that could enable such states to link to the RGGI market in the future, including potentially at a cap trajectory which may not align with the RGGI cap trajectory resulting from the Third Program Review.”  In particular, the RGGI states seek stakeholder feedback on potential accommodation mechanisms such as:

• The potential application of allowance trading or compliance ratios between entities in states that have and have not adopted the cap trajectory resulting from the Third Program Review.
• The potential application of volume limits in trading or compliance between entities in states that have and have not adopted the cap trajectory resulting from the Third Program Review.
• The proper basis to determine such potential allowance trading/compliance ratios, or volume limits, including respective emissions cap levels, reduction trajectories, price levels, and/or other relevant factors.
• Other potential mechanisms that would allow for participation by states implementing a cap trajectory that is different than the cap trajectory resulting from the Third Program Review, such as a cap trajectory previously adopted in regulations to be consistent with the current RGGI program, while safeguarding any new environmental ambition achieved by the current RGGI participating states as a result of the Third Program Review.

These mechanisms all would introduce significant logistical tracking and reporting issues.  In addition, the accommodation mechanisms create an incongruous compliance system.  Consider two trading regions:

• Region 1 starting emissions are 1,000 and the region target is zero in ten years, so the allowance reduction trajectory is 100 allowances per year
• Region 2 starting emissions are 2,000 and the region target is zero in twenty years, so the allowance reduction trajectory is also 100 allowances per year

In the first year the sum of the allowance caps for the two regions is 2,800.  If in the first year Region 1 emissions are 1,000 and the Region 2 emissions are 1,800 the sum of the emissions is 2,800 and the two regions are in overall compliance with the combined limit.  However, within Region 1 the sources are out of compliance if they are treated differently.  The desired environmental impact is achieved but all the accommodation mechanisms proposed penalize the sources.

What is the point of all the additional complexity?  The only rationale is that the ambition is different for timing in two different regions and that needs to be considered.  However, the difference in a ton reduced now versus a ton reduced in 2050 is inconsequential to global climate change.  Therefore, I do not think that any of the potential accommodation mechanisms are necessary.

Conclusion

In the comments submitted I address problems I see with the IPM modeling that underpins the Third Program Review proposals.  IPM estimates that CO2 emissions will be 50% lower across the RGGI region by 2028.  I do not think that is reasonable.  I estimated how many renewable resources would need to be deployed to displace RGGI-affected source emissions and this confirmed my concerns. 

I think the results are related to the limitations of IPM.  Documentation related to the New York biennial review of the observed progress of its GHG emission reduction goals has identified supply chain, higher interest rates, inflation, and workforce limitations that have delayed progress in the rollout of New York wind and solar resource deployment.  All these issues add significantly to model input uncertainty.

I have serious concerns with the modeling results.  My comments note that the IPM modelling approach cannot reconcile the deployment uncertainties observed in New York.  Furthermore, it is not clear how well IPM addresses issues related wind and solar weather related dispatchability.   These ambiguities compound the inherent challenges related to allowance price estimates.  As a result, I believe that the limitations of the IPM projections must be addressed in the Program Design elements.

I commend the RGGI proposal to add second CCR tier.  It is a reasonable response to the intractable uncertainties.  It should be an effective response to my concerns if the parameters are chosen correctly.

Finally, I review the proposed solutions to address environmental ambition if other jurisdictions join RGGI.  I do not believe that the additional complexity and logistical implementation issues associated with the proposals is warranted because the difference in ambition is more symbolic than real.

The Regional Greenhouse Gas Initiative (RGGI) is a market-based program to reduce emissions from electric generating units.  This post describes my comments on the updates to the New York State Energy Research & Development Authority (NYSERDA) Regional Greenhouse Gas Initiative (RGGI) Operating Plan Amendment (“Amendment”) for 2024.  The latest RGGI auctions settled at prices higher than expected so the Amendment presents plans to allocate the $146 million windfall.

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.   I submitted comments on the Climate Act implementation plan and have written over 450 articles about New York’s net-zero transition because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions (GHG) (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 but has since withdrawn and Pennsylvania has joined but is not actively participating in auctions due to on-going litigation. According to a RGGI website:

The RGGI states issue CO2 allowances that are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs.

Proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation, and direct bill assistance. Energy efficiency continued to receive the largest share of investments.

Note that although the goal of the program is to reduce GHG emissions, the investment descriptions include beneficial electrification, climate change adaptation, and direct bill assistance that do not reduce electric sector emissions.

NYSERDA Operating Plan Amendment

NYSERDA designed and implemented a process to develop and annually update an Operating Plan which summarizes and describes the initiatives to be supported by RGGI auction proceeds.  On an annual basis, the Authority “engages stakeholders representing the environmental community, the electric generation community, consumer benefit organizations and interested members of the general public to assist with the development of an annual amendment to the Operating Plan.”

The Amendment describes the plans to use New York’s RGGI proceeds in the next several years.  On September 19, 2024, NYSERDA hosted a webinar meeting to present proposed changes to the Operating Plan initiated because auction revenues were significantly higher than assumed last December.  The meeting materials include the following:

• Agenda [PDF]
• Presentation [PDF]
• Webinar Recording 
• Draft 2024 RGGI Operating Plan Amendment (Revised) [PDF]

The draft Amendment explains that New York State is supposed to invest RGGI proceeds to support comprehensive strategies that best achieve the RGGI greenhouse gas emissions reduction goals pursuant to 21 NYCRR Part 507.  The programs in the portfolio of initiatives are designed to support the pursuit of the State’s greenhouse gas emissions reduction goals by:

• Deploying commercially available energy efficiency and renewable energy technologies;
• Building the State’s capacity for long-term carbon reduction;
• Empowering New York communities to reduce carbon pollution, and transition to cleaner energy;
• Stimulating entrepreneurship and growth of clean energy and carbon abatement companies in New York; and
• Creating innovative financing to increase adoption of clean energy and carbon abatement in the State.

The NYSERDA RGGI operating plan amendment process exemplifies the Hochul Administration approach to Climate Act implementation.  For all the talk about welcoming stakeholder comments, the reality is far different.  I published my first article on the NY RGGI operating plan in December 2017 and have submitted comments on the last few operating plan amendments.  The stakeholder process reached a low point last December.  Per their obligations NYSERDA prepared an amendment update for the operating plan, announced an Advisory Stakeholder meeting, and held the meeting.  As I documented in my low point post public access to the meeting was not available because someone forgot to provide it. 

Realizing their mistake and recognizing open meetings obligations, NYSERDA did follow up with an “Opportunity for Public Discussion” webinar.  The recording of the meeting supports my concern that public engagement is not a real priority.  They were clearly just going through the motions.  The meeting consisted of agency staff reading scripted spiels that recited information in the operating plan amendment with no additional context or details.

Most disappointing was that the webinar only set aside 30 minutes to respond to questions.  I submitted 16 questions before the meeting that they did not bother to try to address until there were only five minutes left.  They only addressed four of them.  That exemplifies the stakeholder comment approach for the Climate Act.  They go through the motions of asking for comments, don’t respond to most comments submitted, and when they do respond they ignore the implications of the question.

Comment Summary

 Although supporters of RGGI claim that it is a successful model to emulate, my comments explain the implications of the actual results affect not only the RGGI program but also the Climate Leadership and Community Protection Act (Climate Act).  The comments I submitted to respond to this request were similar to the comments I submitted last December.   I documented my analyses that show that observed New York State (NYS) emission reductions from the electric sector since 2000 are primarily due to fuel switching and retirements.  The reductions directly attributable to RGGI are only on the order of 10% of the total.  Coupled with the facts that there are no significant fuel switching opportunities available and that additional retirements threaten reliability, this means that we cannot expect emission reductions to continue as before.  The Operating Plan must ensure that adequate funding for emissions reductions are available to ensure that the emission mandates are achieved.

In my comments I included my concern that the zero-emissions resources being deployed to displace the affected RGGI sources must include a new technology.  It is clear that new technology is needed to achieve the goals. As part of the proceeding to implement a large-scale renewable program and the Clean Energy Standard (Proceeding 15-E-0302), the Public Service Commission held a technical conference on December 11 and 12, 2023 entitled “Zero Emissions by 2040” that included a session titled “Gap Characterization.”  The session described the gap between the capabilities of existing renewable energy technologies and future system reliability needs.  Speakers acknowledged that generation from wind and solar alone could not fill it and recognized the need for some new resource needs to be developed to provide electricity to meet demand when wind and solar production are low.  They referred to this new, not-yet-existing, hypothetical technology as the Dispatchable Emissions-Free Resource, or “DEFR.” 

The need for emission reductions and need for new technology should be the top priorities for the NYSERRDA RGGI Operating Plan in general and this Amendment in particular.  Adequate funding for zero-emission electric generation is a prerequisite for a successful transition.  The transition cannot occur unless this new technology necessary for the zero-emissions electric grid is developed.  A feasibility analysis is needed as soon as possible to determine how much money will be needed for emission reductions consistent with the goals and to determine what is needed for new technology development and deployment.  Such an analysis would also determine a realistic schedule.  I acknowledge that there are competing priorities to minimize costs for low- and middle- income customers that should also be prioritized but the key point is that there are proposed programs that do not address any of the priorities.

DEFR Resource Recommendation

As a meteorologist I have a particular concern about the DEFR technology.  To determine how much DEFR must be developed, it is necessary to characterize the wind and solar resource “gap”.  The characteristics of the resource gaps must be quantified not only for New York but also for adjoining regional systems presuming that they also transition to an electric system with a similar reliance on wind and solar.

Some work in this regard has been completed.  For example, as part of the recently completed NYISO 2023-2042 System & Resource Outlook, DNV modeled “long-term hourly simulated weather and generation profiles for representative offshore wind (OSW), land-based wind (LBW), and utility- scale solar (UPV) generators”.  The analysis covered the period 2000 to 2021 and was limited to the New York Control Area.  At the September 27, 2024 New York State Reliability Council (NYSRC) Extreme Weather Working Group (EWWG) meeting, Thomas Primrose from PSEG Long Island presented his analysis of data from the DNV work.  Among other things, his evaluation found that all New York solar, onshore wind, and offshore wind capacity averaged less than 10% for 73 hours starting November 23, 2016 at 1600.  I found that if the renewable resources projected in the Integration Analysis, without any fossil-fired resources, were operating at that time that there would have been a cumulative generation deficit of up to 103,465 MWh within the lull.  Note that the lull deficiency projection length is dependent upon the location of the solar and wind facilities, so this is an approximation.  Nonetheless, it exemplifies the challenge that DEFR must resolve

Recommendation

For anyone who is really interested, my comments describe the proposed programs in the Amendment, so I am not going to describe them here.  I ranked the proposed programs by the emission reduction obligation for RGGI-affected sources, energy conservation and efficiency programs for consumers, and feasibility analysis criteria into three categories.  The highest priority programs address one or more of these criteria or an issue that must be resolved for the transition to succeed.  In my comments recommended that program funding incorporate these priority category rankings.

Highest priority – addresses technological gap for emission reductions, consumer energy savings, or electric sector feasibility

• DEFR Gap Feasibility Study
  • Scoping Plan Implementation Research
  • Technical Services
  • Circular Economy Renewable Energy Feasibility Study

Medium priority – directly supports emission reductions, consumer energy savings, or electric sector feasibility

• Disadvantaged Communities Schools/Buildings
  • Comfort Home

Lowest priority – no emission reductions, no consumer energy savings and does not address electric sector feasibility

• ChargeNY
  • Green Jobs – Green New York
  • Building Retrofit and New Construction Challenges

Conclusion

The State of New York has consistently allocated RGGI auction proceeds inconsistent with the stated goals of the program.  As long as emissions were going down then this had no impact on RGGI program goals.  The emission reduction low-hanging fruit are gone now, and cost-effective and efficient emission reductions are needed to maintain compliance with the RGGI limits.  The failure of the 2024 RGGI operating plan to recognize this need could very well mean that RGGI reduction goals and the Climate Act emission reduction targets will not be achieved.  It gets worse because the New York Cap-and-Invest (NYCI) program that is supposed to be developed in 2024 will also include compliance limits.  If state investments do not produce emission reductions consistent with the NYCI limits, then the only compliance option would be to stop running. In other words, the stakes have been raised and NYSERDA has not accounted for that in the program review.

The regulatory review stakeholder process does not include a real attempt to address stakeholder input.  In my retirement it has become a hobby of mine to continue my involvement with the Climate Act regulatory proceedings.   I respond to requests for comments knowing full well that if I am lucky, I will get some indication that someone read the comments, but I expect nothing else.  With all due respect to the State agencies, colleagues and I have more experience and background for this particular topic than their staff so it would be appropriate for a real dialogue with the state’s subject matter experts.  Even in the absence of the State’s lack of discussion I persevere because I consider my submitted comments a marker.  When this inevitably all blows up, the record will show that they had been warned.  Unfortunately, the odds are that the ideologues pushing these policies will have moved on to a new grift so they will never be held accountable.

I have prepared seven annual updates on the Regional Greenhouse Gas Initiative (RGGI) annual Investments of Proceeds report.  While preparing the most recent edition I realized that there were some lessons to be learned concerning the relative emission reduction effectiveness of the different investments categories used in the reports.  This post compares the dollars per ton of CO2 reduced for five investment categories.

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 (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 and dropped out at the end of 2023.  Pennsylvania has joined but is not actively participating in everything due to on-going litigation. 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.”

Proceeds Investment Report

The 2022 investment proceeds report was released on July 8, 2024.  For general information I refer you to my most recent  update.  In this article I am going to present data from the last five reports.  Each report breaks down the investments into major categories.  The 2022 investment report explains:

Energy efficiency makes up 49% of 2022 RGGI investments and 61% of cumulative investments. Programs funded by these investments in 2022 are expected to return about $1.5 billion in lifetime energy bill savings to more than 189,000 participating households and over 2,000 businesses in the region and avoid the release of 6.5 million short tons of CO2.

Clean and renewable energy makes up 7% of 2022 RGGI investments and 6% of cumulative investments. RGGI investments in these technologies in 2022 are expected to return over $139 million in lifetime energy bill savings and avoid the release of more than 660,000 short tons of CO2.

Beneficial electrification makes up 12% of 2022 RGGI investments and 4% of cumulative investments. RGGI investments in beneficial electrification in 2022 are expected to avoid the release of 315,000 short tons of CO2 and return over $97 million in lifetime savings.

Greenhouse gas abatement and climate change adaptation makes up 3% of 2022 RGGI investments and 8% of cumulative investments. RGGI investments in greenhouse gas (GHG) abatement and climate change adaptation (CCA) in 2022 are expected to avoid the release of more than 11,000 short tons of CO2.

Direct bill assistance makes up 21% of 2022 RGGI investments and 15% of cumulative investments. Direct bill assistance programs funded through RGGI in 2022 have returned over $77 million in credits or assistance to consumers.

Emission Reduction Cost Efficiency

Ultimately RGGI is supposed to be a CO2 emission reduction program. GHG emission reduction efforts are complicated by the fact that there are no cost-effective add-on GHG emission controls available for existing sources.  That means the owners of the electric generating units in RGGI have only two options to reduce emissions: switch to lower CO2 emitting fuels or operate less.  Importantly, in order maintain reliability in the electric system when facilities run less, somebody else must develop replacement zero-emissions generating resources to replace their output. Proponents of cap-and-dividend programs like RGGI tout the use of the auction proceeds to fund the deployment of alternative resources and load reduction programs.  However, as is the case with any source of funding controlled by a political bureaucracy, money can get diverted away from the original purpose of the program in many ways.  There always is a rationale for all the other purposes but if insufficient resources are not available to support the deployment of alternative resources there will be problems providing sufficient load when it is needed while complying with the RGGI requirements.

All my summaries of the RGGI Investment Proceeds reports have found the same results.  Since the beginning of the RGGI program RGGI funded control programs have been responsible for a small fraction of the observed reductions (e.g., only 7.5% in 2022).  The primary reason for the observed reductions has been fuel switching away from coal and oil to natural gas.  Importantly, the availability of potential fuel switching in the RGGI fleet of electric generating units is running out.  Consequently, future reductions will have to rely on the deployment of zero-emission generating resources and load reductions which makes cost-effective emission investments important. 

This makes the cost-effective investment for alternative resources all the more important.  I calculate cost effectiveness by dividing the RGGI total investments divided by the estimated avoided CO2 emissions. In my annual summaries I only looked at the overall values.  In 2022 the CO2 emission reduction efficiency was $941 per ton of CO2 reduced.  In 2023 NY RGGI emissions totaled 28,654,177. If RGGI investments were the sole approach for emission reductions, then it would cost $27.0 billion to go to zero.

There is one more complication that I should note.  I believe that the appropriate methodology to calculate the CO2 emissions reduction efficiency is to use the annual investment and avoided emission estimates.  The problem is that the RGGI reports provide annual values and expected lifetime values.  The metric for net-zero is annual emissions so it is inappropriate to consider lifetime values.  The Proceeds reports always include a caveat that the states continually refine their estimates and update their methodologies, but the historical annual numbers are not included in the proceed reports so my estimates do not reflect subsequent refinements. 

In the following sections I will provide specific information for each of the investment categories

Energy Efficiency

The RGGI report glossary describes energy efficiency programs as follows:

Programs designed to improve energy efficiency by reducing overall energy use without degrading functionality. This includes programs directed at assisting low-income families and small businesses. Program costs include evaluation and measurement. Examples: home energy audit programs, home and building weatherization, energy efficient appliance or industrial equipment rebate programs, compact fluorescent light bulb programs, and energy efficiency workforce training programs.

The following table lists information for this investment category for the last five years.  Note that the effectiveness ($ per ton removed) ranges from $249 per ton to $1,665 per ton and the five-year average is $687 per ton.  The range is so large that it suggests that there is an inconsistency.  It could be differences due to different methodologies amongst the state agencies who prepared data for the report and interannual variation between analysts.  Based on my experience with similar estimates this is more art than science because the assumptions and input data used can lead to markedly different estimates. In addition, the states included in the analysis varies so the effects of methodological differences changes.  In my opinion, those issues would not account for the this wide a range so the possibility that there were typos in the data could also be a factor.  The RGGI state decision to not update the annual values also could be a factor inasmuch they might have identified an error that subsequent analyses corrected.  It is also possible that I made an error that is responsible for the variation.

Clean and renewable energy

The RGGI report glossary describes clean and renewable programs as follows:

Programs directed at accelerating the deployment of renewable or other non-carbon emitting energy technologies. Program costs include evaluation and measurement. Examples include incentives for residential solar panels, financing of commercial renewable energy projects through green banking, research and development of new energy technologies.

The following table lists information for this investment category for the last five years.  Note that the effectiveness ($ per ton removed) ranges from $158 per ton to $862 per ton with a 5-year average of $429.  Because of the wide range in values the previously mentioned caveats for potential errors are also relevant here.

Beneficial electrification

The RGGI report glossary describes beneficial electrification programs as follows:

Programs designed to reduce fossil fuel consumption by implementing or facilitating fuel-switching to replace direct fossil fuel use with electric power. Examples include incentives for electric vehicles and home appliances, and installation of electric vehicle infrastructure. Program costs include evaluation and measurement.

This category is complicated.  The report notes that:

Often, these programs result in an increase in MWh, but do reduce carbon emissions overall. As the grid becomes cleaner, the emissions from electrified appliances become cleaner, as opposed to the fixed emissions intensity of fossil-powered appliances.

The report argues that net emissions are lower, but the details of the calculations are not provided.  The net emissions calculation is highly dependent upon the characteristics of the electric generation resources that are displaced so I am skeptical with this claim.  The reported values may also be affected if the power and energy estimates consider the energy losses between the generating stations and the electrification applications.  This category was added in 2020 so the following table lists information for this investment category for the last three years.  The cost effectiveness ranges from $1,769 to $2,198 per ton with a 3-year average of $1,986 per ton. Note that there is not as much variation in the cost per ton reduced effectiveness but that the cost efficiencies are much higher than the other investment categories.

Greenhouse gas abatement and climate change adaptation

The RGGI report glossary describes GHG abatement and climate change adaptation programs as follows:

Programs promoting the research and development of advanced energy technologies, the reduction of vehicle miles traveled, the reduction of emissions in the power generation sector, tree-planting projects designed to increase carbon sequestration, other initiatives to reduce greenhouse gases, and climate adaptation and community preparedness initiatives. Some projects can support multiple functions, such as natural area restoration that also serves flood mitigation planning purposes. Program costs include evaluation and measurement.

The following table lists information for this investment category for the last five years.  Note that the 2021 and 2022 reports did not include avoided power and bill savings information.  There is a huge variation in the cost effectiveness values with 2021 listed as 100 times higher than the lowest value.  It appears that the avoided CO2 value is much lower than the other values.  If that value is incorrect then it would explain the high outlier.  The average value excluding the outlier is $842 per ton removed.

Direct bill assistance

The RGGI report glossary describes direct bill assistance programs as follows:

Programs providing energy bill payment assistance, including direct bill assistance to low-income ratepayers. Program costs include evaluation and measurement.

This category does not provide any emission reductions.  The following table lists information for this investment category for the last five years.  Note that the total direct bill assistance totals $243 million.

Administration and RGGI, Inc.

There are two other categories for administrative costs that do not provide any emission reduction benefits.  The RGGI report glossary describes administration as “Funds directed to administrative overhead expense associated with all RGGI-funded programs, including outsourced and in-house overhead expenses” and RGGI Inc. as: “Funds provided to RGGI, Inc. to support and implement state CO2 Budget Trading programs.”

The following tables show the information for the last five years.  Administration costs total $89 million and RGGI costs total $13 million.

Summary

I summed the values for each category over the last five years to provide the following summary.  Note that the overall cost effectiveness is $959 per ton avoided.

Cost Effectiveness Implications

RGGI is supposed to be an emissions reduction program.  One of my big concerns about any cost on carbon emissions is that it is a regressive stealth tax on energy.  There is a tradeoff between trying to minimize those impacts and reducing emissions.  In the last five years $243 million or 17.4% of the RGGI auction proceeds went to direct bill assistance which is good but that means that much less was available to reduce emissions.  Throw in the $102 million over the last 5 years for administration that means that 24.7% of the RGGI auction proceeds were not used to reduce emissions.

The primary goal of this article is to compare the cost effectiveness of emission reductions for the following investment categories: energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation.  The following table summarizes the cost effectiveness.  For the investment categories that provided emission reductions Clean and Renewable Energy was the most effective way to reduce emissions.  As far as I can tell this category provides the most funding for projects that directly reduce emissions.  It is encouraging that the energy efficiency is right around the average over all the categories.  This means that energy efficiency programs targeted at low- and middle-income households most affected by this energy tax will still provide effective emission reductions. 

On the other hand, programs promoting the research and development of GHG abatement and climate change adaptation are less effective at reducing emissions.  Perhaps a greater emphasis on programs promoting reduction of emissions in the power generation sector and advanced energy technologies and less emphasis on programs for the reduction of vehicle miles traveled, tree-planting projects designed to increase carbon sequestration, and climate adaptation and community preparedness initiatives would improve emission reduction efforts consistent with the emission reduction goal of RGGI.

The worst emission reduction programs are associated with beneficial electrification that are “designed to reduce fossil fuel consumption by implementing or facilitating fuel-switching to replace direct fossil fuel use with electric power.“  This category was added recently.  There are two ways to look at the high numbers.  On one hand, it could be that it recognizes that reductions of overall fossil fuel consumption require efforts across all sectors.  On the other hand, I think it inappropriately transfers costs to the electric sector that do not provide efficient emission reductions.

Discussion

As noted previously, since the beginning of the RGGI program RGGI funded control programs have been responsible for a small fraction of the observed reductions (e.g., only 7.5% in 2022).  The primary reason for the observed reductions has been fuel switching away from coal and oil to natural gas. There are limited opportunities to make further fuel switching changes.   Consequently, future reductions will have to rely on the deployment of zero-emission generating resources.  This means that compliance with the RGGI emission caps is out of the control of the affected generating units and that RGGI investments must fund much of the reductions needed.

There are associated ramifications with the  RGGI Third Program Review currently underway but stalled for months.  The Acadia Center has been lobbying to resolve the impasse and “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”. The most effective compliance strategy to date, fuel switching, cannot reduce emissions to zero.   The affected sources are unable to guarantee compliance because the deployment of zero-emissions resources are out of their control.  The recently released Clean Energy Standard Biennial Review Report found that New Yorks deployment of renewable resources is incompatible with the 2030 Climate Act goal to reach 70% by 2030.  Combined with the inefficient emission investment results, it is clear that Acadia’s position is incompatible with the reality of these findings.

Conclusion

To this point RGGI implementation has been able to rely on emission reductions from fuel switching at affected sources.  In the current program review process, climate activists are demanding that the future emission reduction trajectory be consistent with a zero-emissions electric grid at some point.  This means that fuel switching will eventually not be a viable option and, given that fuel switching opportunities are more limited than in the past, the ramifications are likely soon.  This is troubling because the ultimate compliance strategy for an affected source that has insufficient allowances due to an inappropriate reduction strategy is to simply stop running.

If RGGI investments could effectively support the development of zero-emissions resources or reduce load efficiently, then the affected sources could meet reasonable emission reduction trajectories.  Unfortunately, the results shown here suggest that RGGI investments have not been particularly cost efficient.  The bigger issue is that pressure to use RGGI funds to support electrification of other sectors not only causes an increase in load and likely emissions for the affected sources, but these results show that those investments have the worst cost per ton removed efficiencies.  Coupled with pressure to make equity-based investments that may or may not be efficient, this means that RGGI investments may be inadequate to support aspirational emission reductions targets.  All this suggests that the likelihood that RGGI compliance requirements will cause artificial energy shortages when units stop operating because they have inadequate allowances is increasingly likely.

This is the seventh installment of my annual updates on the Regional Greenhouse Gas Initiative (RGGI) annual Investments of Proceeds report.  This post compares the claims about the success of the investments against reality.  As in my previous posts I have found that the claims that RGGI successfully provides substantive emission reductions are unfounded and that the revenue investments cost per ton reduced far exceed all social cost of carbon estimates.

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 (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 and dropped out at the end of 2023.  Pennsylvania has joined but is not actively participating in everything due to on-going litigation. 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.”

Proceeds Investment Report

The 2022 investment proceeds report was released on July 8, 2024  According to the press release:

The participating states of the Regional Greenhouse Gas Initiative (RGGI) today released a report tracking the investment of proceeds generated from RGGI’s regional CO2 allowance auctions. The report tracks investments of RGGI proceeds in 2022, providing state-specific success stories and program highlights. The RGGI states have individual discretion over how to invest proceeds according to state-specific goals. Accordingly, states direct funds to a wide variety of programs, touching all aspects of the energy sector.

In 2022, $364 million in RGGI proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement, and direct bill assistance. Over their lifetime, these 2022 investments are projected to provide participating households and businesses with $1.8 billion in energy bill savings and avoid the emission of 6.6 million short tons of CO2.

The largest share of the investments was directed to energy efficiency, with 49% of the 2022 total. Other categories receiving significant investments include direct bill assistance, clean and renewable energy programs, beneficial electrification, and greenhouse gas abatement and climate adaptation programs. Approximately 30% of these investments went towards environmental justice and equity focused programs. For more details on both 2022 and cumulative investments and benefits, see the full report, Investment of RGGI Proceeds in 2022.

The report breaks down the investments into five major categories:

Energy efficiency makes up 49% of 2022 RGGI investments and 61% of cumulative investments. Programs funded by these investments in 2022 are expected to return about $1.5 billion in lifetime energy bill savings to more than 189,000 participating households and over 2,000 businesses in the region and avoid the release of 6.5 million short tons of CO2.

Clean and renewable energy makes up 7% of 2022 RGGI investments and 6% of cumulative investments. RGGI investments in these technologies in 2022 are expected to return over $139 million in lifetime energy bill savings and avoid the release of more than 660,000 short tons of CO2.

Beneficial electrification makes up 12% of 2022 RGGI investments and 4% of cumulative investments. RGGI investments in beneficial electrification in 2022 are expected to avoid the release of 315,000 short tons of CO2 and return over $97 million in lifetime savings.

Greenhouse gas abatement and climate change adaptation makes up 3% of 2022 RGGI investments and 8% of cumulative investments. RGGI investments in greenhouse gas (GHG) abatement and climate change adaptation (CCA) in 2022 are expected to avoid the release of more than 11,000 short tons of CO2.

Direct bill assistance makes up 21% of 2022 RGGI investments and 15% of cumulative investments. Direct bill assistance programs funded through RGGI in 2022 have returned over $77 million in credits or assistance to consumers.

Emissions Reductions

In my previous articles on the Proceeds reports, I have argued that RGGI mis-leads readers when they claim that the RGGI states have reduced power sector CO2 pollution over 50% since 2009. In the following table, I list the 9-state RGGI emissions and percentage reduction from a three-year baseline before the program started in 2009.

I have argued that the implication in the report’s 50% claim is that the RGGI program investments were primarily responsible for the observed reduction even as the economy grew (Chart 1 from the report).

I believe that their insinuation that RGGI was primarily responsible for the emission reductions is wrong.  The following table lists the emissions by fuel types for ten RGGI states.  It is obvious that the primary cause of the emission reductions was the fuel switch from coal and residual oil to natural gas.  This fuel switch occurred because it was economic to do so.  I believe that RGGI had very little to do with these fuel switches because fuel costs are the biggest driver for operational costs and the cost adder of the RGGI carbon price was too small to drive the use of natural gas over coal and oil. 

I believe that the appropriate measure of RGGI emissions reductions is the decrease due to the investments made with the auction proceeds so I compared the annual reductions made by RGGI investments.  The biggest flaw in the RGGI report is that it does not provide the annual RGGI investment CO2 reduction values accumulated since the beginning of the program.  In order to make a comparison to the CO2 reduction goals I had to sum the values in the previous reports to provide that information. 

The following table lists the annual avoided CO2 emissions generated by the RGGI investments from previous reports.  The accumulated total of the annual reductions from RGGI investments is 4,277,230 tons while the difference between the three-year baseline of 2006-2008 and 2022 emissions is 56,704,448 tons.  The RGGI investments are only directly responsible for 7.5% of the total observed annual reductions over the baseline to 2022 timeframe! 

Although proponents claim that this program has been an unqualified success I disagree.  Based on the numbers there are some important caveats to the simplistic comparison of before and after emissions.   The numbers in the previous paragraph show that emission reductions from direct RGGI investments were only responsible for 6.7% of the observed reductions.   In a detailed article I showed that fuel switching was the most effective driver of emissions reductions since the inception of RGGI and responsible for most of the reductions.

Benefits

Table 1 from the report lists two benefits of 2022 RGGI Investments: emission reductions and energy bill savings.  Energy bill savings derive from investments in energy efficiency savings and other efforts that directly reduce costs to consumers.  These energy saving benefits typically account for total savings over the lifetime of the project investment.  RGGI does the same thing with the CO2 emission reductions but I think that is misleading because the emission reduction metric is annual emissions and not lifetime emissions. 

Emission Reduction Cost Efficiency

There is another aspect of this report that is mis-leading and after arguing with RGGI and New York State about the issue, I have concluded that the deception is intentional.  I believe that a primary concern for GHG emission reduction policies is the cost effectiveness of the policies and I have argued that this report should provide the information necessary to determine a cost per ton reduced value for control programs for comparison to the social cost of carbon.  If the societal benefits represented by the social cost of carbon for GHG emission reductions are greater than the control costs for those reductions, then there is value in making the reductions.  If not, then the control programs are not effective.

Recall that RGGI provides lifetime CO2 emission reductions but I think that is misleading because it suggests that the emission reduction cost efficiency of the investments is the total investments divided by the lifetime benefits of those benefits.   For example, dividing the 2022 investments of $364 million by the lifetime avoided CO2 emissions (7,507,128) yields a value of $49.  The Biden administration is re-evaluating the social cost of carbon values but for the time being has announced an initial estimate of $51 per ton and this suggests that RGGI investments are close to being cost effective relative to the Federal social cost of carbon.

However, the social cost of carbon value is calculated for an annual reduction of one ton.  In particular,

the social cost of carbon is an estimate, in dollars, of the present discounted value of the benefits of reducing annual emissions by a metric ton. I believe that using the lifetime emissions approach is wrong because it applies the social cost multiple times for each ton reduced.  It is inappropriate to claim the benefits of an annual reduction of a ton of greenhouse gas over any lifetime or to compare it with avoided emissions. In my comments on the New York Climate Act Scoping Plan, I explained that the value of carbon for an emission reduction is based on all the damages that occur from the year that the ton of carbon is reduced out to 2300.  Clearly, using cumulative values for this parameter is incorrect because it counts those values over and over.  I contacted social cost of carbon expert Dr. Richard Tol about my interpretation of the use of lifetime savings and he confirmed that “The SCC should not be compared to life-time savings or life-time costs (unless the project life is one year)”. 

In order to calculate the CO2 emissions reduction efficiency consistent with the social cost of carbon, the proper estimate is the total investments since the start of the program divided by sum of the annual emission reductions.  The problem is that the RGGI reports do not provide that total and instead only provide the sum of the annual lifetime CO2 avoided emissions.  The Proceeds reports always include a caveat that the states continually refine their estimates and update their methodologies, but the annual numbers are not updated to reflect those changes.  Ideally to get the best estimate of the annual numbers the RGGI states should provide the revised annual numbers for each year of the program. Because that is not the case, I have had to rely on the original annual numbers provided in previous editions of the report.  I summed the values in the previous reports to provide that information as shown in the Accumulated Annual Regional Greenhouse Gas Initiative Benefits Through 2022 table shown above.  The accumulated total of the annual reductions from RGGI investments is 4,277,230 tons through December 31, 2022. The sum of the RGGI investments in the previous table is $4,023,548,913 over that time frame.  The appropriate comparison to the social cost of carbon is $4.024 billion divided by 4,277,230 tons or $941 per ton reduced. 

Conclusion

The 2022 RGGI Investment Proceeds report tries to put a positive spin on the poor performance of RGGI auction proceeds reducing CO2.  The alleged purpose of the program is to reduce CO2 from the electric generating sector to alleviate impacts of climate change.  Since the beginning of the RGGI program RGGI funded control programs have been responsible for 7.5% of the observed reductions.  The report does not directly provide the numbers necessary to calculate that estimate which I have come to believe is deliberate.  When the sum of the RGGI investments is divided by the sum of the annual emission reductions the CO2 emission reduction efficiency is $941 per ton of CO2 reduced.  I conclude that although RGGI has been effective raising revenues it is not an effective CO2 emission reduction program.