Has the Regional Greenhouse Gas Initiative Been Successful?

The Regional Greenhouse Gas Initiative (RGGI) was supposed to be nearing completion of a 2016 Program Review[1] but the election of Donald Trump and the fate of the national Clean Power Plan has delayed that process. This is the first post in a series of posts that will discuss how RGGI has fared so far. This particular post will provide background information so that I don’t have to include it every time. The RGGI stakeholder process is dominated by its adherents and now that I am retired I can offer an alternative view of the program. In this post I will offer my thoughts on whether the program has been successful.

RGGI is a cap and auction program in nine states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont – to reduce greenhouse gas emissions[2]. According to the most recent RGGI Investment Summary Report[3]:

Proceeds from the Regional Greenhouse Gas Initiative (RGGI) have powered an investment of $1.37 billion in the energy future of the New England and Mid-Atlantic states. This report reviews the benefits of programs funded through 2014 by RGGI investments, which have reduced harmful carbon dioxide (CO2) pollution while spurring local economic growth and job creation. The lifetime effects of these RGGI investments are projected to save 76.1 million MMBtu of fossil fuel energy and 20.6 million MWh of electricity, avoiding the release of approximately 15.4 million short tons of carbon pollution.

I have been involved in the RGGI program process since its inception. Before retirement from a Non-Regulated Generating company, I was actively analyzing air quality regulations that could affect company operations and was responsible for the emissions data used for compliance. From that background let’s look at the RGGI results quoted above.

The biggest flaw in the adherent’s vision of RGGI success is that RGGI is a driver of affected source decisions. In my opinion based on my experience and discussion with company folks responsible for the economics and operations of affected facilities where I worked and elsewhere, RGGI is simply a tax. Yes it adds to the cost of doing business but because the cost of allowances can be added into the bid price it is a nuisance and not a driver of decisions. I will address how this added cost ultimately affects emissions in a later post.

When RGGI notes that $1.37 billion is being invested in the energy future of the New England and Mid-Atlantic states that number reflects the proceeds from the allowance auctions aka the tax. Because this is a carbon tax there a couple of cautionary tales. The reference notes that the nine participating RGGI states received $1.79 billion in auction proceeds in the period covered by this report. RGGI investments represent $1.37 billion spent to date and another $329.4 million is committed to 2015 and future programs. Note that these numbers do not total up. Despite best intentions by those folks who set up the program $93.1 million has been transferred to state general funds by politicians. In other words any carbon tax should have iron clad specifications on how the money will be used or politicians will get involved and co-opt the stated goal of the tax.

In RGGI the stated goal was to invest the RGGI proceeds in programs that would ultimately reduce carbon emissions and protect the rate-payers. The Investment Summary Report notes the fraction of funding that reduce carbon emissions (overall 80%) for energy efficiency (57%), clean & renewable energy (15%), and GHG abatement (8%) programs. Direct bill assistance (15%) is a more difficult sell as a carbon abatement program but because increased costs to the consumer disproportionately affect those least able to afford those increases I personally can live with those programs. However, 4% of the funds went to “administration” and another 1% to the RGGI organization itself. Clearly when big bucks are involved politicians are not the only ones attracted to the trough. The concept of a carbon tax that offsets that cost and returns all proceeds to offset other taxes is attractive. Based on RGGI, however, be careful what you wish for.

To their credit RGGI analyses have always been careful to not over-sell the actual emission reductions due to RGGI itself. When the Program Review notes that the lifetime effects of these RGGI investments are projected to save 76.1 million MMBtu of fossil fuel energy and 20.6 million MWh of electricity they are basing those numbers on the displacement of energy and emissions due to their energy efficiency, clean and renewable energy and GHG abatement programs. As noted earlier these numbers will be addressed in a later post.

Finally let’s consider the ultimate goal of the program – GHG reductions. The Program Review Summary claims their investments have avoided the release of approximately 15.4 million short tons of carbon pollution. However, note that they spent $1.37 billion to achieve those reductions so the cost per ton is $88.67. Given that the EPA social cost of carbon is $36 per ton these reductions are not cost effective by that measure.

However one thing is missing in all of the analyses and reports to date. The ultimate purpose of the program is to lower global warming but nothing has ever been published quantifying what these reductions will do in that regard. A back of the envelope calculation shows why. A recently published paper[4] estimates that the Federal Clean Power Plan will reduce global temperature rise by 0.013 degrees Centigrade. The Clean Power Plan is supposed to reduce CO2 emissions by 870 million tons. The carbon reductions attributable to RGGI are 15.4 million tons and simply pro-rating the published projection of global temperature rise with the RGGI emissions yields 0.00023 degrees Centigrade. In my opinion because we cannot possibly measure that small a change in temperature the global warming benefit of this program is nil.

I will give RGGI credit for developing the infrastructure to conduct a cap and auction program. They have an auction system that has conducted numerous sales without a hitch, there is a CO2 tracking program and the compliance methodology works. In addition the investments in energy efficiency and direct bill assistance are social benefits with no regrets.  As a result I believe that RGGI is only a qualified limited success and no where near as successful as it its adherents claim.

[1] https://www.rggi.org/design/2016-program-review

[2] https://www.rggi.org/rggi

[3] https://www.rggi.org/rggi_benefits

[4] Bjorn Lombory, 2015: Impact of Current Climate Proposals, Global Policy, Article first published online: 9 NOV 2015, DOI: 10.1111/1758-5899.12295, http://onlinelibrary.wiley.com/doi/10.1111/1758-5899.12295/full

Cuomo Proposes a Lower Regional Greenhouse Gas Initiative Cap

I had intended to make my first post a description of what I hope to do at this website. However, I want to comment on an issue that has come up and have decided that an example of what I hope to do is better than a description.

On January 9, New York Governor Cuomo presented the 14th proposal of his 2017 State of the State: http://www.governor.ny.gov/news/governor-cuomo-presents-14th-proposal-2017-state-state-lower-regional-greenhouse-gas-initiative. He proposed lowering the Regional Greenhouse Gas Initiative (RGGI) Cap by 30% between 2020 and 2030. Let’s look at both sides of this issue.


The Regional Greenhouse Gas Initiative (https://www.rggi.org/) is a cooperative effort by nine Northeastern and Mid-Atlantic States to cap and reduce CO2 emissions from the power sector. Because emissions dropped much more than expected, the RGGI states revised and lowered the 2014 RGGI cap to 91 million short tons. The RGGI CO2 cap then declines 2.5 percent each year from 2015 to 2020. The current policy is that the cap will remain flat after that. Cuomo proposes to further reduce the cap from 78.2 million tons in 2020 to 75.1 million tons in 2021, declining to 54.6 million tons in 2030.

Cuomo’s Side of the Issue

According to the press release

In New York, RGGI has led to a 46 percent reduction in carbon emissions from affected power plants and a 90 percent reduction in coal-fired power generation. To date, New York State has generated close to $1 billion in RGGI proceeds, which help fund clean energy and emission reduction programs. Under the current policy, the RGGI cap remains consistent after 2020 and emissions remain flat region-wide. By reviewing the RGGI program and adjusting the cap to reflect the progress made in just a few short years, New York and neighboring states will continue to reduce emissions annually after 2020 and ensure that power sector emission reductions continue through 2030.

The Governor’s proposal to reduce RGGI’s cap an additional 30 percent between 2020 and 2030, builds upon Governor Cuomo’s landmark clean energy programs, including the Clean Energy Standard, established by the Governor in August 2016 to require 50 percent of New York’s electricity to come from renewable energy sources by 2030. An additional component of this plan includes capturing the carbon benefits of zero-emission nuclear power. 

Pragmatic Environmentalist Side of the Issue

While it is probably not fair to ask for supporting documentation for a press release, the Governor’s landmark clean energy programs have been remarkable for the lack of implementation information so developing a response is difficult. Nonetheless it is possible to show that the press release sound bite is at best, misleading. Consider this quote: “In New York, RGGI has led to a 46 percent reduction in carbon emissions from affected power plants and a 90 percent reduction in coal-fired power generation.” The implication is that were it not for RGGI these reductions would not have occurred.

The Environmental Energy Alliance of New York (EEANY) submitted a relevant white paper to RGGI on June 6, 2106 archived under the April 29 2016 stakeholder meeting section at https://www.rggi.org/design/2016-program-review/stakeholder-comments-2016. The white paper notes that there was a paper on this topic : Murray, Brian C., Maniloff, Peter T., Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market, and Policy Factors, Energy Economics (2015), doi:10.1016/j.eneco.2015.07.013. This paper concluded that “The analysis shows that after the introduction of RGGI in 2009 the region’s emissions would have been 24 percent higher without the program, accounting for about half of the region’s emissions reductions during that time”. The presentation further suggested that “The other half is due to recession, complementary environmental programs and lowered natural gas prices.”

There also was a relevant Congressional research service report Ramseur, Jonathan L., April 27, 2016: The Regional Greenhouse Gas Initiative: Lessons Learned and Issues for Congress, Congressional Research Service, 7-5700, R41836, The Regional Greenhouse Gas Initiative: Lessons Learned and Issues for Congress. There was no attempt to quantify the specific emissions impact but the author noted that

“Although actual emissions were ultimately well below the original emissions cap, the cap’s existence attached a price to the regulated entities’ CO2 emissions. Because the cap level was above actual emissions, the allowance price acted like an emissions fee or carbon tax. Although the cap likely had limited direct impact on the region’s power plant emissions, the revenues generated from the emission allowance sales likely had some impact on emission levels in the region.”

The White Paper includes an analysis that I prepared to quantify the change in emissions due to RGGI. I used data from EPA’s CAMD Data and Maps website to look at the changes in CO2 emissions in the RGGI states by fuel type. The analysis did not attempt to reconcile differences between RGGI and all the other programs in this database. Annual data were downloaded for the years 2006-2015 for the RGGI states for all programs. Non-RRGI affected units are included and some of the included units report only six months of the year so this is not an exact analysis. Nonetheless, these data can give us an idea of how RGGI emissions were reduced.

For this analysis (Table 1 in the white paper) the 2006-2008 data were averaged to establish a pre-RGGI baseline and the total and fuel-type specific annual emissions were subtracted from the baseline to get the reductions during the RGGI program. For the facilities in this dataset in 2015 there has been a 41 million ton reduction from the 127 million ton baseline or a 32% reduction. Note that coal and residual oil emissions dropped 57 million tons from the baseline of 85 million tons or 67%. Natural gas emissions increased 15 million tons and other solids (mostly wood) increased1.3 million tons. Over the same time period gross loads and steam load declined 23% and 58%, respectively.

The RGGI “Investment of RGGI Proceeds Through 2013” (Published April 2015 by RGGI Investment of RGGI Proceeds: Full Report). report states that “Over their lifetime, these RGGI investments are projected to save more than 48.7 million mmBtu of fossil fuels and 11.5 million MWh of electricity, avoiding the release of approximately 10 million short tons of carbon pollution”. In 2013 RGGI CO2 emissions were 89,115,811 tons of CO2 so based on this RGGI report were it not for RGGI there would have been 10 million more tons of CO2 emitted so total emissions would have been 99,115,811 tons so the difference from the baseline is 28,178,600 tons (Table 2 in the white paper). I calculated the percentage difference with and without the program to compare with results from the Murray and Maniloff paper. That calculation estimates that emissions would have only been 11% higher than without the program according to the RGGI estimate of investment impacts.

The lower bound for RGGI program CO2 emissions reductions during this period can also be estimated. It can be argued that the coal and residual oil emissions were lower due solely to the changes in cost differences relative to natural gas and additional regulations and compliance pressure for NOx, Hg, and (in New York) opacity. This assumes that RGGI compliance is incorporated into the bid price and so was not a driver in facility decisions. Making those assumptions then means that the CO2 reductions directly due to RGGI should be the savings of 48.7 million mmBtu of natural gas specifically and the natural gas emission factor for CO2 should be used for CO2 displacement. Table 3 lists this calculated value, 2,848,950 tons. This calculation shows that emissions would have been only 3% higher than without the program.

Recall the quote: “In New York, RGGI has led to a 46 percent reduction in carbon emissions from affected power plants and a 90 percent reduction in coal-fired power generation”. It is difficult to reproduce the reduction estimates but the values are consistent with the white paper estimates of the total reductions. Three different evaluations of the actual impact of RGGI concluded that the emissions would have ranged between 24% and 3% higher than without the program. I should also note that claiming RGGI has anything to do with the coal-fired power generation reductions is a stretch because of the effect of lower natural gas prices and other New York environmental regulations.

Next post: the feasibility of further CO2 reductions in New York.