After Eight Years, a Strong Report Card for RGGI

Good environmental news is always welcome, especially these days. So, it’s a pleasure to be able to report on an innovative regional program’s outstanding long-term record of reducing greenhouse gas emissions on a grand scale.

Through eight years of operation, the Regional Greenhouse Gas Initiative (RGGI) has helped nine Northeast and Mid-Atlantic States (Connecticut, Delaware, Massachusetts, Maryland, Maine, New Hampshire, New York, Rhode Island and Vermont) significantly reduce emissions of carbon dioxide (CO₂) and other pollutants from their electric power sector. The success of this first-in-the-nation program is a testament to the boldness of the region’s leaders, the thoughtfulness of the program’s designers, and the consistent, rapid development of the clean energy economy.

RGGI is a cap-and-trade program that holds polluting power plants accountable for their CO₂ emissions. For each ton of CO₂ it emits, a plant must buy and surrender one emission permit, called an allowance. The limited quantity of allowances across the region creates a regional cap, thus guaranteeing a limit on regional emissions. As a market-based program, RGGI does not dictate how much each power plant or each state should reduce its emissions, but rather lets the regional market determine how to achieve the lowest-cost emissions reductions.

RGGI was not the first cap-and-trade program to reduce power plant emissions --federal programs to curb SO₂ and NO_x emissions have existed since the 1990s, and the European Union established a cap-and-trade program targeting CO₂ emissions shortly before RGGI began. But RGGI was the first to auction the majority of its allowances, rather than giving them to power plants for free.

This is an important distinction. Previous programs, in giving away allowances, passed valuable assets to polluters, providing them with windfall profits. By instead selling those allowances, the RGGI states ensured that the value of allowances would be used for clean energy programs and ratepayer assistance. This decision has proved critical to RGGI’s success, and provided a standard for other regions that want to reduce pollution, accelerate the transition to clean energy, and boost the local workforce and economy.

Slashing Emissions, Fostering a Clean Energy Transition

Since the program began, RGGI has delivered benefits on many fronts. First and foremost, RGGI has helped the participating states reduce CO₂ emissions by 40 percent since 2008 (Figure 1).

Figure 1: RGGI Caps and Actual Emissions

Emissions in 2016 continued the downward trend of recent years, coming in 8 percent below the 2016 emissions cap and 5 percent below 2015 emissions. RGGI’s experience continues to show that power-sector emissions can be reduced much more quickly and cost effectively than expected.
Energy efficiency programs, funded by revenue from allowance sales, are reducing demand for electricity across the region, while electricity is increasingly being supplied by renewable energy sources (Figure 2).

Figure 2: Increasing Role of Energy Efficiency

Both trends are helping to displace electricity generation from aging, inefficient, carbon-intensive sources like coal and oil, while deferring the need to invest in costly natural gas infrastructure. All together, these factors are helping to make electricity in the region cleaner and more affordable.

Gains in energy efficiency and non-emitting generation are projected to continue in the years ahead. In the nine RGGI states, budgets for electric efficiency programs have more than tripled, from $575 million in 2008 to $1.9 billion in 2015. These programs are the primary beneficiaries of RGGI revenue, and investments in energy efficiency typically yield economic benefits of three to four times the up-front cost. Renewable generation will continue increasing, as all nine RGGI states have Renewable Portfolio Standards that require electric utilities to procure increasing quantities of renewable electricity.

As the RGGI states continue to achieve these increasingly ambitious targets for clean energy growth, the economic and environmental well-being of the region will continue to benefit. New, high-quality jobs will be created in the booming clean energy sector. The region will pay less for imported fossil fuels needed to power traditional generation. Cleaner air means healthier citizens, who spend more time at school and work and make fewer costly hospital visits. And achieving these goals will enable the RGGI states to meet their own economy-wide GHG targets for 2030 and 2050, doing their share to mitigate the worst impacts of climate change.

Looking Ahead: Clean Air, Healthier People

But the good news doesn’t stop there. Measures taken to reduce CO₂ emissions also result in reductions of harmful co-pollutants like SO₂, NO_X, mercury and particulate matter. Unlike CO₂, whose impacts occur on a global level, these co-pollutants endanger the health of people living in the region, increasing the incidence of asthma, heart attacks, and premature death. These burdens fall disproportionately on disadvantaged communities, and include hospital visits and missed time from work and school. According to a recent report from Abt Associates, RGGI’s emissions reductions through 2014 have accounted for $5.7 billion in avoided health costs across the region, making the return on investment even better.

RGGI has successfully demonstrated the viability of a market-based program to reduce power-sector CO₂ emissions while generating broad benefits for participating states. Trends that have contributed to emissions reductions — fuel-switching, improved energy efficiency, and increases in renewables — show no sign of reversing in the RGGI region, suggesting that additional emissions reductions are achievable.

RGGI’s experience has also dispelled concerns frequently associated with capping power-sector emissions. Economic growth has not been stifled, even though emissions have declined rapidly and far more dramatically than projected. RGGI’s reinvestment model has benefited the regional economy and increased employment. And the region now pays lower electricity prices than before the program began.

In the wake of actions by the Trump administration to remove or weaken federal climate protections, the Northeast’s pioneering climate program continues to reduce carbon pollution and drive economic growth. Member states must work together through the current RGGI Program Review to preserve the program’s effectiveness and signal commitment to continuing bipartisan climate leadership.