New York Governor Andrew M. Cuomo, in his State of the State address, proposed a tougher carbon cap for states covered under the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program. The proposal underscores RGGI’s opportunity for achieving even greater emissions reductions in future years, as its current carbon cap remains significantly higher than actual emissions produced in the nine member states.
Laying out an energy- and climate-intensive policy agenda for New York, in his address on January 9, 2013, Governor Cuomo proposed a tougher RGGI carbon cap as part of efforts to address climate change and clean energy development in the state. RGGI, the nation’s first carbon cap-and-trade program, has helped reduce CO2 emissions levels by 30% across member states since inception in 2008. However, RGGI’s current carbon cap of 165 million tons of CO2 per year is now much higher than actual emissions produced in member states – only 91 million tons (expected total) in 2012. With a cap this high, RGGI states may have emitted 45% more carbon last year and still met program compliance.
RGGI now comprises nine member states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New York, New Hampshire, Rhode Island and Vermont – aiming to reduce power sector carbon emissions by 10% relative to 1990 levels by 2018. Member states participate in a regional carbon market, where they can trade carbon emission permits; each permit allows a business entity to emit one ton of CO2. RGGI holds quarterly auctions for emission permits, reducing the carbon cap each year.
New York State, in coordination with New York State Energy Research Development Authority (NYSERDA), Department of Energy Conservation, and Public Service Commission, invests auction proceeds per an operating plan. Notable initiatives include energy efficiency, renewable and clean energy deployment, and energy conservation. Through 2010, New York spent $150 million of the proceeds on emission reduction programs while promoting energy efficiency measures and renewable projects. Investment programs include installation of solar photovoltaic (PV) systems, workforce training, and sustainable community development.
RGGI is part of a Climate Action Plan that includes other principles, such as covering emissions from all sectors, and reinvesting auction revenue to develop clean energy technology. A three-year summary of RGGI released in June 2012 shows an average annual emission reduction of 23% since 2009, and a 33% collective reduction below the cap. In addition, a separate report by Analysis Group, finds that RGGI added $1.6 billion revenue to member states and facilitated $1.1 billion in savings for ratepayers.
Markets have long recognized the need for a tougher carbon cap to improve the effectiveness of the RGGI program. While the program has achieved intended success metrics – reduced coal consumption, increased deployment of renewables, improved efficiency, and ultimately lower emissions – current emissions levels would argue that power plants in member states have met their caps with ease. A large part of the reduction came in early years from switching to cheaper natural gas. If adopted, Cuomo’s proposal to lower the RGGI carbon cap could help achieve ambitious emission cuts in future years of the program.
Angelique Mercurio is an energy policy analyst and a founding partner at Energy Solutions Forum Inc., an energy policy research and data company based in New York City.