Energy & Environment

Regulators look to improve Regional Greenhouse Gas Initiative

Regional energy regulators want to know how to improve a regional effort to curb carbon-dioxide pollution from electrical generators in Northeast states, and they’re seeking comments from interested members of the public to aid that effort.

The Regional Greenhouse Gas Initiative, or RGGI, was enacted in 2009. It was the first cap-and-trade program for carbon dioxide emissions generated by utilities. Nine states participate in RGGI: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

States, regulators and RGGI administrators are reassessing the effectiveness of the program and soliciting public comments.

The program works by setting a cap on the amount of carbon dioxide that may be emitted from power plants that generate at least 25 megawatts.

That cap is currently set at 91 million tons. The total number is broken down into what are called “apportionments.”

The apportionments are sold at auction and can be redeemed by a utility or resold on the open market.

While utilities typically buy apportionments, almost anyone can purchase them, and some entities appear to have held on to apportionments from past years with the object of cashing them in once they’ve accumulated more value.

When RGGI began, the cap was set at 165 million tons of carbon dioxide per year; it soon became apparent, though, that the cap was too high, said Brian Woods, an environmental analyst with the Agency of Natural Resources who serves as the agency’s lead staff member for the initiative. In 2012, after a similar review of the program RGGI member states reduced the cap to 91 million tons.

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After that review RGGI also began selling a fewer apportionments each year than utilities that needed them were expected to use, with the aim of inducing investors who had banked past apportionments to surrender them, Woods said.

The organization reserves some millions of apportionments, however, and in 2014 and 2015 RGGI sold 15 million additional apportionments after the price hit a threshold. These “Cost Containment Reserves” kick in to meet exceptional demand and avert price spikes, Woods said.

During this review period, regulators will attempt to discover some way to recover the 15 million additional apportionments, along with the excess apportionments auctioned off before the cap was reduced in 2012, Woods said.

Regulators also want to know how the cap should be lowered in the future, Woods said. The cap is currently slated to decrease by 2.5 percent annually through 2020; what trajectory the cap should follow after that point remains an unresolved question, he said.

Regulators also want help in evaluating the effectiveness of a price floor on apportionments as a means to prevent collusion between the apportionments’ purchasers, Woods said.

The next RGGI apportionment auction takes place Dec. 7.

Through 2014, RGGI is estimated to have saved 76 MMBtu of fossil-fuel energy, and 21 million MWh of electricity. The initiative’s organizers claim that savings has averted about 15.4 million tons of carbon pollution.

Since 2005 states enrolled in RGGI have reduced the carbon-dioxide emissions of their electricity generation by more than 45 percent, while the region’s gross domestic product in the same period grew by eight percent, RGGI administrators said in a report last month.

The same effort saved 4.6 million households, and 21,400 businesses, around $4.7 billion in “lifetime energy bill savings,” the September RGGI report, titled “The Investment of RGGI Proceeds through 2014,” states.

Since the program’s inception in 2009, states have received from RGGI around $2 billion in proceeds. The money has been disbursed primarily through state energy efficiency and renewable energy efforts, Wood said.

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