Nine northeastern states that broke ground with the nation's first cap-and-trade program are nearing a decision on whether to seek even deeper greenhouse gas emissions cuts. It will be an important test of whether state governments will be able to counteract the Trump administration's retreat from climate policies.
The member states of the Regional Greenhouse Gas Initiative (RGGI) are expected to unveil their decision in the coming weeks, following a 20-month review process that involved public meetings and intense private negotiations among states with differing energy mixes and political landscapes.
In three of those states—Maine, New Hampshire and Maryland—the Republican governors or their appointees have expressed concerns over the potential costs of deeper emissions cuts. If the rest of the RGGI states push for deeper cuts, any of these three could decide to follow in the steps of New Jersey's GOP governor, Chris Christie, who withdrew his state from RGGI in 2011.
Across the compact, however, there is bipartisan support for increasing RGGI's ambition. Massachusetts Gov. Charlie Baker, a Republican, and New York Gov. Andrew Cuomo, a Democrat, are the most outspoken advocates of more stringent goals.
It is possible that the more ambitious states will take a stand that causes a rift in the RGGI nine—if only temporarily, said Mark Kresowik, eastern region deputy director of the Sierra Club.
"'This is the future we're going to have, and if you're not committed to making climate progress, we're going to go without you'—I think that's what these states need to say," Kresowik said. "Ultimately, Maine and New Hampshire will come along—in part, because their citizens certainly support the program." A poll conducted for the Sierra Club last year showed 77 percent of registered voters in the RGGI states support deeper carbon reduction goals.
Since creating the interstate compact to cut utility sector carbon emissions in 2009, the RGGI states have cut their carbon emissions from electric generation by 37 percent and reduced electricity prices by 3.4 percent, all while growing their economies 3.6 percent faster than states outside their club, according to a study by the clean energy nonprofit Acadia Center.
But climate action advocates have long argued that the states must set more ambitious targets and strengthen the RGGI rules in order for the program to achieve continued success. The RGGI decision now has taken on greater urgency in the wake of President Donald Trump abandoning the Paris climate agreement.
"It's more important than ever for states and regions to lead on climate," said Jackson Morris, eastern energy director at the Natural Resources Defense Council (NRDC). "The decision reached by the RGGI states in the coming weeks is going to be a pivotal demonstration of whether we can continue to make progress, even if we see no progress [driven by the federal government] under Trump."
How RGGI Cuts Emissions—and Beats Its Goals
Under their current rules, RGGI states have agreed to reduce the carbon emissions of their utilities by 2.5 percent each year, based on the previous year's emissions.
The states sell enough pollution credits to electricity generators for them to meet their current goal, and the generators can choose to reduce their emissions through efficiency measures or by switching fuels. Generators can also sell and buy excess credits.
The states have beaten their pollution reduction goal in every year of the program. In 2016, carbon dioxide emissions came in more than 7 million tons below the cap.
The most ambitious option the RGGI states are considering now would increase the cuts to 3 percent a year, plus a one-time 6.5 percent cut in 2019. Another option they've aired is to shift to a 3.5 percent annual cut. Or they could negotiate another approach.
Like all regions across the United States, RGGI states have seen low-cost natural gas driving out coal-fired power, contributing to emissions reductions, but a study by the Nicholas Institute for Environmental Policy Solutions and the Duke University Energy Initiative found that the main driving factor in lowering emissions in the RGGI states was the cap-and-trade program.
Victim of Its Own Success?
But as RGGI emissions have fallen steadily, that 2.5 percent slice that the states have committed to cut has meant less in absolute terms each year.
As a victim of its own success, then, the RGGI carbon market is out of whack—with the supply of pollution credits far exceeding demand.
That means the prices of the credits are so low that polluters can easily purchase them rather than investing in other steps to cut their own emissions.
At the most recent auction, in June, credits sold just above the floor price, at $2.53 per ton—their lowest price in five years. That is a lost opportunity for the states, which use auction revenues for clean energy and conservation programs to help residents cut their electric bills.
Costs (and Benefits) of a Tighter Cap
NRDC released a study Monday showing that compared to keeping the cap unchanged, states would gain $3.2 billion more in revenue through 2030 with the most ambitious option they are considering—tightening their carbon reduction goal to 3 percent per year, with a one-year deep cut of 6.5 percent in 2019 to pick up even more of the slack.
"All of the program's history suggests we can continue to go after these emissions reductions aggressively without causing a burden to ratepayers," said Jordan Stutt, a policy analyst at the Acadia Center.
Stutt pointed to modeling conducted for the RGGI states showing that the tighter cap would result in 99 million avoided tons of carbon dioxide through 2031—the equivalent of one year's worth of emissions from 26 coal plants. The cost would be less than a tenth of a penny per kilowatt-hour for consumers. (For an average U.S. household consuming 900 kilowatt-hours per month, that would be equivalent to a 90 cent electric bill increase.)
The clean energy drive has provided benefits beyond fighting climate change—in significantly fewer premature deaths, heart attacks, asthma attacks, and respiratory illnesses, according to an Abt Associates study released earlier this year. It quantified the health savings at $5.7 billion.
"No matter how you slice it, this program has been a major success," Stutt said.
RGGI's Choice Has Broader Implications
To strengthen the program, the RGGI states will need to reach consensus. Observers say negotiations are under way daily. "It's an intensive process," Morris said. "You have nine different states with different challenges and different politics."
New Jersey, which has lost more than $100 million in revenue due to Christie's decision to pull out in 2011, may rejoin RGGI soon; both gubernatorial candidates in the race to replace him in November support coming back into the fold. And Virginia is considering joining the compact.
Morris said RGGI's decision will be important not only within the region but as a model for other states considering strong climate action.
RGGI officials have been mum on where negotiations stand, but observers expect a decision by the end of the summer. There will be a lag between the decision and a public announcement, they expect, as RGGI plans to do detailed modeling to show the potential impact on the states' economies and jobs from whatever decision they propose.
"The RGGI states are still working to evaluate design elements for the program and to move forward with a consensus that meets the needs of every RGGI state," said Katie Dykes, chair of both the Connecticut Public Utilities Regulatory Authority and the RGGI board, in an email. "The RGGI states have not set a deadline for the conclusion of program review, but will communicate with stakeholders and provide updates as they are available regarding future meetings and materials."
With the current RGGI states together comprising the world's sixth largest economy, the northeastern states' decision—following California's vote last week to extend its own cap-and-trade program—could determine whether the U.S. can continue on a pathway to meeting its goals under the Paris climate agreement.
Six of the RGGI states—New York, Massachusetts, Connecticut, Vermont, Delaware and Rhode Island—are part of the U.S. Climate Alliance of 13 states and Puerto Rico that have pledged to meet the Paris target despite Trump's decision to exit the international agreement.
"This is one of the first major decisions of states on how to reduce carbon pollution since the Trump administration announced its plans to withdraw from international negotiations," Kresowik said. "This is really a test of some of the rhetoric that has come out of the more progressive states. ... Are those governors serious? Are they actually going to do what they said they were going to do?"