Vermont’s efficiency utility received $3.3 million this year through the Northeast carbon cap-and-trade initiative. The money will be used to fund the state’s thermal efficiency program.
Vermont participates in the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade “market” among nine Northeastern states designed to cap regional greenhouse gas emissions and encourage states to invest in renewable energy and efficiency projects.
During quarterly auctions, participating states sell and purchase carbon allowances, which function as the market’s currency, at a price that varies based on the regional cap of 91 million tons of carbon for 2014. Vermont received its carbon allowance in 2009, when it first joined the program.
The state has since raked in about $12 million for thermal efficiency programs by selling its allowances to other states. In the most recent auction in December, Vermont sold nearly all its 288,224 carbon allowances at about $3 each, adding up to $864,672 in proceeds. Buyers in the compact must purchase one allowance for each ton of carbon emissions they produce.
These proceeds go to Efficiency Vermont for thermal efficiency programs designed to reduce the cost of heating residents’ homes.
“This has been extraordinarily successful,” said Gov. Peter Shumlin during a news conference Wednesday outlining several regional climate change goals.
Shumlin, who is a member of the White House Task Force on Climate Preparedness and Resiliency, said the state cannot solve climate change issues alone and must take advantage of these sorts of programs.
“Whenever a single state, that’s as narrow and long as Vermont is, thinks that it can raise huge amounts of revenue to solve climate change all by themselves … we have challenges,” he said. “So we need to talk about regional, or better yet, national approaches to the biggest challenge that we face.”
The RGGI, one example of Vermont’s partnership with other states, has provided the state millions of dollars for thermal efficiency projects. This is largely because Vermont has a large amount of allowances, said Justin Johnson, deputy secretary of Agency of Natural Resources.
Before Vermont signed onto the initiative in 2009, the state anticipated the closing of Entergy’s Vermont Yankee nuclear plant and replacing it with another electricity generating facility, which would guarantee higher carbon emissions than a nuclear plant. Vermont Yankee will now operate until the end of 2014 while Vermont continues to enjoy the allowances.
“We got an excess of allowances essentially to cover the possibility that our [electric] generation [emissions] would go up,” Johnson said.
Vermont hardly buys any of these allowances when it goes to auction, he said. There are two facilities in Vermont that meet the 25-megawatt threshold requiring the purchase of carbon emission allowances. These include the McNeil Generating Station in Burlington and a gas-powered plant in Berlin, operated by Green Mountain Power during peak demand.
All states have different rules for what they do with auction proceeds, Johnson said. After the auction, a check goes to the Vermont Public Service Board and they allocate 98 percent of the money to the Vermont Energy Investment Corp., which operates Efficiency Vermont, to provide funding for thermal efficiency projects.
Efficiency Vermont gets the rest of its thermal efficiency financing through ISO New England’s Forward Capacity Market, which pays the state to reduce its load on the grid during peak demands, said Jim Merriam, director Efficiency Vermont.
Merriam said thermal efficiency programs in the state have essentially taken 50,000 cars off the road over the course of the initiative.
While this will not reduce the regions net carbon output, the initiative’s cap on emissions will reduce by 2.5 percent after 2015 until 2020, which will shrink the regions supply of carbon and increase its demand.
Some states do not use the proceeds to invest in renewables or efficiency. For example, New Hampshire uses its money to balance their budget. Similarly, New Jersey pulled out of the program after raiding the funds in 2011.
Johnson said what other states do with the money will not affect Vermont’s allocation of allowances. Participating states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.
Shumlin said he was disappointed when New Jersey Gov. Chris Christie, who recently came to Vermont for a GOP fundraiser event, pulled out of the program.
“RGGI is something to be proud of and to embrace, not something to raid for short-term budget gains – as has occurred in some states recently – or to reject for political gain,” said Shumlin in a 2011 statement.
Recently, eight Northeast governors, including Shumlin, called on Southern states to reduce their emissions and align with the standards set in the East. Christie is not part of this consortium.
On Wednesday, the administration announced upcoming grants for municipal investment in electric car charging stations across seven states. The grants will be announced soon after the New Year, a news release stated.