Efforts to unravel a regional carbon trading program have hit a wall in recent weeks after lawmakers in New Hampshire, Delaware and Maine moved to reaffirm their states' participation in the market.
"The tide has definitely turned against these ideas of pulling out of RGGI," Seth Kaplan, vice president of policy and climate advocacy for the Conservation Law Foundation (CLF), told SolveClimate News.
"It is a classic political pattern. You have a small group of committed folks trying to make something happen, and they do not realize the depth of the people who oppose them," he said from CLF's Massachusetts office.
But in New Jersey, where a group of lawmakers is still trying to repeal RGGI, the decision could go either way with potentially serious consequences for the future of the scheme, experts say. The state emits nearly as many greenhouse gases as New Hampshire, Delaware and Maine combined.
Among those considering pulling out, "the most important state of all is New Jersey," said Emilie Mazzacurati, head of carbon research for North America at Point Carbon, a Thomson Reuters research firm.
RGGI, or the Regional Greenhouse Gas Initiative, is a carbon market between 10 Northeast and Mid-Atlantic states and the first mandatory emissions trading plan in the country. The program has come under fire this year mostly from GOP legislators, who have accused RGGI of raising energy prices and putting businesses in participating states at a competitive disadvantage.
Observers attribute most of the opposition's momentum to campaigns mounted by Americans for Prosperity (AFP) and the American Legislative Executive Council (ALEC), groups funded in part by billionaire oil executives Charles G. and David H. Koch, respectively.
In New Jersey, the local AFP chapter claims that energy taxes under RGGI have cost businesses and consumers more than $66 million.
But proponents of RGGI — which include business owners, trade groups and environmental organizations — have evidence that the pact reduces energy costs by promoting energy efficiency, and creates jobs by offering clean energy companies incentives to move to the region.
So far, their data has swayed lawmakers to remain in the program.
Under RGGI, power plants in participating states are required to cap carbon dioxide emissions at 188 million short tons per year through 2014, with additional annual reductions of 2.5 percent from 2015 to 2018. States sell carbon allowances through quarterly auctions and invest the earnings in energy efficiency and clean technology efforts.
RGGI was launched in 2005 and held its first online auction for carbon credits in 2008. States have since raised nearly $861 million in carbon allowances from 11 auctions, according to the latest auction results posted by RGGI.
"With what happened [in mid-May], it may be the beginning of the end for a lot of these efforts" to repeal RGGI, said Luis Martinez, an energy attorney for the Natural Resources Defense Council (NRDC) in Washington, D.C.
RGGI Survives N.H. Vote, with Caveats
On May 10, the New Hampshire Senate voted by a 2-1 margin to amend the state's participation in RGGI, rather than repeal it, as a March bill passed by the state House of Representatives sought to do.
The GOP-led House Science, Technology and Energy Committee approved the initial bill to withdraw New Hampshire from RGGI in mid-February.
Gov. John Lynch has said he would veto the repeal bill if it passed in the Senate, though advocates said that a positive vote from both chambers could be enough to potentially override him.
State Rep. Andrew Manuse, the bill's co-sponsor, said at the House committee hearing in February that "the regional greenhouse gas initiative has simply not impacted the overall reduction of emissions, yet it has had — and will continue to have — a significant negative impact on the economy."
He also pointed out that in 2010, the legislature diverted $3.1 million from the RGGI fund to help balance the state's budget — a move, Manuse argued, that shows that the cap-and-trade scheme is a "stealth tax."
The Senate's amended bill could help prevent a future diversion by replacing an emissions-reduction fund with an energy-efficiency fund and increasing energy-efficiency rebates. Also under the bill, the state could withdraw from RGGI if another state with at least 10 percent of the initiative's total electricity production, like New Jersey, exits the program.
Martinez said that New Hampshire state senators were encouraged by a 2011 evaluation from the University of New Hampshire to vote against a RGGI withdrawal.
The evaluation studied the impact of 30 grants from $17.7 million used for energy programs from June to October 2009. It determined that lifetime savings from the initial grants could reach $60.6 million in energy costs and curb carbon emissions by nearly 200,000 metric tons over the next 20 years.