RGGI Redux

Time To Rethink RGGI In Light of Upcoming EPA Rules On Existing Power Plants

Lower RGGI Cap or A Ratcheted Down & Stricter EPA Rule

The Senate Environment Committee heard S151 yesterday, and re-engaged the RGGI debate, just 2 days after a NJ court Ordered the Christie Administration to reconsider the Governor’s unilateral decree to leave the RGGI pact without complying with public rule making procedures.

The Court’s decision was another rebuke to the Gov.’s abuse of executive power – and the Court gave the Administration just 60 days to comply.

The bill – co-sponsored by Senate President Sweeney – is another political challenge to the Gov.’s decision to leave RGGI.

Whether the bill represents a real challenge of the Gov.’s abuse of executive power and a legitimate greenhouse gas emissions reduction effort remain to be seen. The last thing we need at this point are partisan stunts.

During the hearing, Chairman Smith had fun with Doug O’Malley of Environment NJ, one of the successful plaintiff’s in the lawsuit that led to the Court’s decision.

O’Malley played the Cheshire Cat, but perhaps prematurely, as the Court’s Order could turn out to be a Pyrrhic procedural victory, a point the Chairman’s later question “What happens if DEP proposes a regulation to exit RGGI” clearly brought out.

Tom Johnson at NJ Spotlight covered the hearing, see: SENATE COMMITTEE VOTES OUT BILL THAT WOULD REQUIRE RETURN TO RGGI

I had not planned to testify, but felt compelled to testified to clarify a few issues.

Again, unfortunately, I was forced to agree with Governor Christie regarding RGGI impacts on emissions from the power sector. RGGI simply does not provide incentives or enforceable regulatory sticks to reduce emissions from the NJ power sector. Just the opposite – it locks in and allows significant increases to current emissions.

And RGGI certainly does very little to implement the goals of the Global Warming Response Act, which require an 80% reduction by the year 2050.

During the few years it operated, RGGI allowances sold at the statutory minimum and the program generated about $50 million per year to fund energy conservation, efficiency, and low income consumer subsidy programs.

Those are great programs that provide great benefits, but the small emissions reductions they provide can be secured by other existing programs funded under the far larger Societal Benefits Charge ($400 million/year). Those programs can be mandated by BPU under the existing laws governing energy efficiency and renewable energy goals, and NJ’s renewable portfolio standards.

We don’t need RGGI to authorize or fund those programs. Far larger pots of money and legal leverage exist to fund and mandate far larger emissions reductions.

So the RGGI program’s justification should focus exclusively and be grounded in far larger potential emission reductions from the power sector.

And from that perspective, the program fails badly. Power sector emissions reductions are far more significant than the small reductions that result from RGGI funded conservation, efficiency, and consumer subsidy programs.

In addition to failing to make these critical distinctions between energy demand and supply and the various suite of programs that should target each (and who should pay and how those programs should be financed), I wonder whether the environmentalists who supported the bill read it.

1. The legislation requires that the trading program shall be:

“consistent with the terms of the Memorandum of Understanding signed by New Jersey and other states on December 20, 2005”.

The so called pollution cap under that 2005 MOU agreement is at least 35% above current emissions.

The bill will result in the OPPOSITE of what it claims: instead of providing incentives to reduce current emissions, it will provide incentives to increase them.

If the Legislature were serious, they would require that as a condition of NJ rejoining RGGI, that the cap be reduced so that real reductions occur based on current emissions. And they would put a number into law, say by 35% – and put the total NJ emission allowances in the bill to make them enforceable.

It is my understanding that the RGGI states are already engaged in negotiations to reduce the current cap, so this issue must be addressed by NJ policymakers anyway (assuming NJ were to re-enter RGGI).

2. As I testified, EPA is scheduled to propose regulations under the Clean Air Act to reduce greenhouse gas emissions from existing power plants in June 2014.

The Natural Resources Defense Council is suggesting that those EPA rules could reduce current emissions from existing plants by 21 – 31%, based on 2012 baseline emissions.

One compliance option under those rules may be participation in RGGI.

So this begs the question: which program will reduce NJ emissions deeper and faster: the EPA rules or the RGGI program?

How do those reductions compare with NJ’s GWRA 80% reduction goal?

So, before deciding whether to rejoin RGGI, state policymakers should be informed by a side by side analysis of RGGI versus the Obama EPA rule, in terms of total emissions reductions over time and the ability to monitor and enforce those reductions.

Again, if the legislature were serious about reducing emissions, then this would have been considered openly – before I had to raise it – and the Chairman would have formally requested that DEP perform that kind of side by side emissions analysis.

That didn’t happen either.

While I am not optimistic that the Obama EPA rule will be aggressive, particularly as applied to NJ which has a relatively low carbon energy infrastructure due to lots of nuclear power, at a minimum sound policymaking demands that side by side comparison.

Such a comparison would also hold the Obama EPA accountable and dispel the myth that the administration is engaged in a “war on coal” and test whether the Obama EPA is serious about using a big regulatory stick to reduce GHG emissions to respond to the climate crisis.

Ironically, the EPA regulation – which would apply nationally and in carbon intensive places like Pennsylvania – would eliminate the business community’s criticism about “leakage” and uncompetitive energy policy that discriminates against lower carbon higher cost NJ power.

In another irony, RGGI was created as an incremental regional state program to spur national action in Congress on a federal market based cap/trade program.

That market based approach has failed in Congress, and the Obama EPA is committed to a regulatory strategy.

So, we also need to rethink not only the numbers, but the fundamental policy choice of a market based or regulatory approach.

I’m a regulatory mandate advocate – the only proven approach.

But not of the NRDC backed “flexible, cost effective, state partnership based” variety of regulation.

No way carbon intensive states make any real commitments without a huge federal EPA regulatory stick.