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.
Further, the study says that the funding has already helped create 70 to 85 full-time equivalent jobs, while low-interest loans have allowed two manufacturers to employ a total of more than 400 workers.
Overall, the state has received $31.5 million in RGGI allowances since 2008.
"They're realizing that this is the type of policy that we want to have in place in order to create jobs and accelerate the transition to a clean energy economy," Martinez said.
Still, he cautioned: "I don't think we could say we're out of the woods in New Hampshire. The House still seems to want to push for this."
Del., Maine Stay Put For Now
A day after the New Hampshire vote, members of Delaware's House Energy Committee voted on May 11 to table a bill that would withdraw the state from RGGI. The move will keep the measure from being discussed by the full House.
The Center for Energy Competitiveness of the Caesar Rodney Institute, a Dover-based conservative think tank, had garnered some support for the bill in the past few months.
The institute says on its website that "Delaware's 2019 carbon dioxide cap and trade goals have already been exceeded and we can now end a program that adds millions of dollars to our electric bills."
On the other hand, Delaware's Department of Natural Resources and Environmental Control, says that the average cost impact of RGGI for a residential electrical customer is about $4 a year.
In Maine, a joint Energy, Utilities and Technology Committee on May 12 unanimously rejected the original language of a bill proposed by Republican State Sen. Tom Saviello, the sole sponsor, to withdraw the state from RGGI and the northeast power grid.
Instead, the committee made a small change to the bill to clarify that Maine's participation is contingent upon the support of other states being sufficient enough to allow the regional market to work effectively, a stipulation included in the state's original 2008 RGGI law.
"This unanimous vote by the Energy Committee reaffirms Maine's commitment to a common sense approach in dealing with the negative impacts of climate change for Maine people, Maine's environment and Maine's businesses," State Sen. Phil Bartlett said via press release.
Following a final language review, the committee will send the amended bill to the Senate and House for votes.
Maine has received $26 million in carbon allowances from 11 RGGI auctions, while Delaware earned $21.3 million in allowances.
Mazzacurati of Point Carbon told SolveClimate News that the pro-RGGI votes in New Hampshire, Delaware and Maine legislatures could be a boon to the program in the long run.
"If efforts are pursued and failed, it gives impetus to the RGGI states to say, 'People want this to happen,'" she said.
New Jersey Still a Wildcard
However, Mazzacurati noted that New Jersey's possible withdrawal from the carbon market would have a larger negative impact on RGGI than if the other states were to exit.
In 2008, New Jersey emitted some 20.6 million tons of carbon dioxide, or nearly 14 percent of total emissions that year from RGGI states. The state's $102 million in carbon allowances account for 12 percent of total proceeds, or $23.3 million more than the three other states' collective earnings.
Gov. Chris Christie said in March that he would reevaluate New Jersey's participation in RGGI and announce his final decision to withdraw or stay before releasing his 2011 New Jersey Energy Master Plan. The plan was expected to be released this spring but was delayed, in part because of Japan's Fukushima crisis and the debate it has provoked over the future of nuclear power in the state.
The state Board of Public Utilities recently canceled three public hearings scheduled for May 20 and 25 and June 1, to discuss the energy plan without explanation or rescheduling the dates.
Meanwhile, a set of bills from last September to repeal the state's Global Warming Response Act and withdraw from RGGI has continued to gain support from legislators.
The state House Environment and Solid Waste Committee bill has two sponsors and 28 co-sponsors, while the state Senate Environment and Energy Committee bill has two sponsors and 13 co-sponsors.
CLF's Kaplan said that while it was too soon to speculate how New Jersey might go, a complicated set of factors could help to weaken RGGI opposition in the state.
Gov. Christie's Position Unclear
Although Christie told a town hall meeting in October that he is skeptical that humans are responsible for global warming, he has aggressively supported bringing offshore wind projects to New Jersey's shores.
The governor has also continued to support solar energy programs, such as the tradable Solar Renewable Energy Credits (SRECs) and net metering, that have made New Jersey the state with the second most solar (PV) energy installed, behind only California.
RGGI allowances would support those initiatives. About one-third of the state's proceeds so far have been spent on clean energy and customer assistance programs to cut electricity costs.
In 2010, the state allotted $29.6 million for 12 large-scale projects, but only six projects worth $12.3 million in loans actually closed after Christie took $68 million from carbon credit sales to balance the 2010 state budget.
"Generally, complicated and messy situations with multiple forces at play is a tough environment for trying to get laws repealed and for trying to change the status quo," Kaplan said.
The climate advocate said that as efforts to repeal RGGI continue to soften, the regional conversation will shift from whether or not states will withdraw to: "How can we get real emissions reductions out of the program, and how can we make it even more effective at the thing that it has been very good at — putting investments into clean energy that directly benefit the ratepayers?"
NRDC's Martinez noted that while opposition to RGGI appears to have subsided somewhat in recent weeks, those efforts likely will not disappear until a national carbon trading program is in place.
National efforts to legislate a carbon cap on U.S. power plants thus far have sputtered. The last federal cap-and-trade effort, the Waxman-Markey bill, passed in the House in June 2009 but failed in the Senate.
"Right now, the action on climate change is all at the state level," Martinez said. "States have really taken the leadership before Congress took action, and now that Congress has stalled, the states are carrying that mantle again. And that's why we're seeing all those attacks at the state level."
RGGI's Credibility at Risk
Mazzacurati said that a single state's withdrawal from RGGI would not affect the functioning of the carbon market, as the CO2 emissions cap of 188 million short tons could be adjusted to reflect the drop in participating power plants.
However, "it would be weaker politically," she said. "RGGI is not just about the market, it is also doing a lot at the national level in promoting these ideas and in talking with states and provinces in Canada who are interested in setting up their own cap-and-trade program.
"That's what would be more damaged: [RGGI's] credibility and its leverage."
Kaplan said that so far RGGI has had the most influence in the European Union, where planners of the six-year-old Emissions Trading Scheme are considering shifting to an auction model like RGGI's that generates proceeds.
"RGGI is the leading example of such a successful model," he said.