RGGI Holds Bipartisan Support in Northeast As Climate Change Issues Debated Nationally

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By Gerald B. Silverman  

Sept. 17 --The Regional Greenhouse Gas Initiative (RGGI), with a few notable exceptions, has managed to maintain bipartisan support in the Northeast over the past several years despite changes in state administrations and the polarization of the issue of climate change in Washington.

Academics, current and former regulators, and environmental advocates interviewed by Bloomberg BNA said the support is the result of a number of factors, including the political composition of the region, a history of joint environmental efforts by Northeastern states, and the fact that RGGI was first proposed by a Republican, former New York Gov. George E. Pataki.

In addition, the design of the program, the way it has been implemented, and broad stakeholder support have helped it withstand changes in political winds as well as changes in administrations, according to those interviewed by Bloomberg BNA.

RGGI is a cap-and-trade program in which electricity generators of at least 25 megawatts must purchase one allowance for each ton of carbon dioxide they emit. Allowances are sold in quarterly auctions, with the auction proceeds returned to the participating states for energy efficiency programs, renewable energy, and direct bill assistance for consumers.

Republican Stance Shifts

Vicki Arroyo, executive director of the Georgetown Climate Center at the Georgetown University Law Center, said the cap-and-trade model used by RGGI was once embraced by Republicans and businesses. She cited the acid rain program under President George H.W. Bush (R) as a prime example.

But she said the politics of climate change, like a number of other issues, has changed along with the political center of the Republican Party.

“It seems to be an issue that people are lining up more along party lines than has ever been the case historically,’’ Arroyo said. “It seems to be joining a list of us-versus-them litmus tests.’

“I can't point to too many examples right now of people like Gov. Pataki, Gov. [Arnold] Schwarzenegger [R-Calif], and Sen. John McCain [R-Ariz], when he was a presidential candidate.’’

Arroyo said some Republican lawmakers are more politically comfortable with policies that will effectively address climate change but are not labeled as climate change initiatives. For example, renewable fuel standards and energy efficiency standards are more likely to be embraced by Republicans in the current political environment than programs that explicitly address climate change such as cap-and-trade or a carbon tax.

It “requires extraordinary courage” for Republicans to say they favor climate change legislation, she said.

Arroyo said northeast states have been able to maintain support across party lines partly because of their history of working together on environmental issues, particularly on the transport of acid rain and other air pollution from the Midwest.

Economic Benefits Popular

Collin O'Mara, RGGI chairman and secretary of the Delaware Department of Natural Resources and Environmental Control, said RGGI has been successful in maintaining support across party lines because of the economic benefits of the program and the performance data available to the states and the public.

“It takes a lot of the politics out of the conversation because you're dealing with hard numbers and economic analysis,’’ he said. “We're not talking about modeling data or some kind of theoretical or academic construct.’’

He said Maine and New Hampshire are good examples of two moderate-to-conservative states where legislation has recently been approved to implement a tighter emissions cap for the program.

“They're making it [the decision to participate in RGGI] because it's in the best economic interest of their states,’’ he said.

The hard data O'Mara referred to include the amount of money that RGGI states have invested in renewable resources, energy efficiency, and direct bill assistance for consumers. Under RGGI, most auction proceeds are used to fund these programs.

RGGI auctions have raised $1.35 billion since the first one was held in 2008. According to a November 2012 report from RGGI, the energy programs funded by RGGI will offset the need for more than 27 million megawatt-hours of electricity generation and 26.7 million British Thermal Units (BTUs) of energy generation during their lifetimes (43 ER 2967, 11/23/12).

These savings, according to the report, will help avoid emissions of 12 million short tons of carbon dioxide pollution, the equivalent of 2 million cars taken off the road.

Emissions Decline in Region

Carbon dioxide emissions have declined dramatically in the region, but RGGI is only one of the factors at play. According to a December 2012 report from Environment Northeast, a Rockport, Maine-based environmental group, the decline can be attributed to a shift away from coal and oil to natural gas and renewables, energy efficiency programs and a decoupling of economic growth and emissions, in addition to the impact of RGGI on emissions (43 ER 3188, 12/14/12).

Carbon dioxide emissions from electricity generators covered by RGGI totaled 92 million tons in 2012, compared with 132 million tons in 2008 (emissions from New Jersey are omitted from the 2008 figure for purposes of comparison--the state left the program in 2011). The original cap of 188 million tons per year was set in 2005 and covers 2009-2014.

Peter Shattuck, director of market initiatives for Environment Northeast, agreed with O'Mara that RGGI has maintained a broad level of support because it is designed to reinvest auction proceeds into energy programs. The economic benefits of the programs have brought more stakeholders into the fold, he said.

In Maine, for example, pulp and paper is one of the state's largest industries. The industry was initially skeptical about RGGI because it feared higher electricity costs, but it now supports the program because it has received funding for energy efficiency programs, Shattuck said.

“I think that [reinvestment of proceeds] really helped with the perception of fairness and created a set of stakeholders that are now invested in the program because they're seeing the benefits,’’ Shattuck said.

Peter Iwanowicz, the former acting commissioner of the New York State Department of Environmental Conservation, also said stakeholder participation was an important element in RGGI's success.

Iwanowicz, director of the Healthy Air Campaign at the American Lung Association, said the strong involvement of stakeholders--particularly the regulated industry--in the design and implementation of the program was critical to maintaining and sustaining support from Republicans and Democrats.

The politics of the Northeast is the key reason why RGGI has been able to maintain bipartisan support, said Geoff Skelley, media relations coordinator for the University of Virginia's Center for Politics. He pointed out that the Northeast tends to be more Democratic and more liberal in its politics than other regions, most of the current governors are Democrats, and Democrats have held a majority of seats in at least one house in each legislature in most states.

RGGI History Began in 2003

The history of RGGI began in 2003, when Pataki first floated the idea for a regional cap-and-trade program modeled after the federal emissions trading programs for nitrogen oxides and sulfur dioxide. In a letter to his fellow governors at the time, he said, “The debate about global warming has often been marked by confrontation and litigation. Today we are pursuing a course of cooperation and we are confident this will achieve meaningful reductions in harmful emissions without disrupting electricity markets.’’

The states held their first staff-level meeting six months later, but it would be another two years before a memorandum of understanding was signed by the first seven RGGI states--Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont.

Those states were led by three Republicans--Pataki, Gov. Jodi Rell of Connecticut, and Jim Douglas of Vermont--and four Democrats--Ruth Ann Minner of Delaware, John Baldacci of Maine, John Lynch of New Hampshire, and Richard Codey of New Jersey.

In 2007, Massachusetts, Rhode Island, and Maryland joined RGGI, with Gov. Deval Patrick (D-Mass.), Gov. Donald Carcieri (R-R.I.), and Gov. Martin O'Malley (D-Md.) signing an amended memorandum of understanding.

While Gov. Paul LePage of Maine is the only sitting Republican governor in the nine RGGI states today, four Republican governors (Pataki, Rell, Douglas, and Carcieri) signed on to participate in RGGI while they were in office.

Former Maryland Gov. Robert L. Ehrlich Jr. (R) did not fully support RGGI, but nevertheless signed the Healthy Air Act in 2006, requiring the state to join the cap-and-trade program, subject to the study of certain concerns. His successor, Gov. Martin O'Malley (D), signed the RGGI memorandum of understanding in April 2007.

“I think this early Republican history helps explain the bipartisan support the program has received over the years,’’ Franz Litz, executive director of the Pace Energy and Climate Center at Pace Law School, told Bloomberg BNA in an e-mail.

“Also, Republicans and Democrats in the Northeast and Mid-Atlantic are generally very practical--if they see a program is producing good benefits and hear that from many businesses and environmental groups alike, then they are likely to keep the program going.’’

Litz, the former climate change policy coordinator at the New York Department of Environmental Conservation, said, “The Obama Administration's plan should put all RGGI states on even stronger bipartisan footing. Soon every state will need to cover power plants and the RGGI states are already ahead of that requirement.’’

In a climate change plan unveiled in June, President Obama laid out a timetable for the Environmental Protection Agency to regulate carbon dioxide emissions from power plants for the first time and pledged other actions on a number of fronts .

21st Auction Held

RGGI held its 21st quarterly auction Sept. 4, selling 38.4 million allowances at $2.67 each. Each allowance permits electricity generators to emit one ton of carbon dioxide (44 ER 2706, 9/13/13).

RGGI does not release the names of successful bidders in its auctions but does release the names of potential bidders who qualify for participating in the auctions. The September auction drew 55 potential bidders, including Consolidated Edison Company of New York, Hess Corp., Koch Supply and Trading, Morgan Stanley Capital Group, National Grid and Shell Energy North America.

The RGGI states are in various stages of promulgating the regulations needed to implement a model rule to lower the emissions cap announced earlier this year. Maine and New Hampshire have enacted legislation to implement the model rule (44 ER 1797, 6/14/13).

The model rule calls for lowering the regional cap by 45 percent. The new cap would limit total carbon dioxide emissions in the region to 91 million tons in 2014, close to what actual emissions were in 2012, and then lower it by 2.5 percent per year from 2015 to 2020.

New Jersey Withdrew in 2011

There have been two significant fractures in RGGI's bipartisan support, one in Massachusetts and one in New Jersey. The biggest setback came in 2011, when New Jersey Gov. Chris Christie (R) withdrew from the program. New Jersey is the only state that has withdrawn from RGGI.

“Our analysis of the Regional Greenhouse Gas Initiative or RGGI reveals that this program is not effective in reducing greenhouse gases and is unlikely to be in the future,’’ Christie said in his May 2011 statement withdrawing from the program.

“RGGI does nothing more than tax electricity, tax our citizens, tax our businesses, with no discernible or measurable impact upon our environment,’’ said Christie, who is widely considered to be a potential Republican candidate for president in 2016.

“Because states such as Pennsylvania are not RGGI members, it's just possible that, by making the cap too stringent, clean New Jersey plants would be forced to close only to be replaced by power from dirty Pennsylvania coal plants.’’

“It doesn't make any sense environmentally or economically and the continuation of this tax makes no sense for my efforts and the lieutenant governor's continued efforts to make New Jersey a more business-friendly environment and a place where private sector jobs can continue to be created,’’ he said.

Romney Declined to Sign

Former Massachusetts Gov. Mitt Romney (R), the Republican nominee for president in 2012, unexpectedly decided not to sign the RGGI memorandum of understanding in 2005. His decision came as a surprise to many, given the high priority Romney had placed on the creation of a state climate change program in 2004 and the fact that the RGGI program had been altered specifically to address concerns raised by Romney.

At the time, Romney said RGGI would be too costly and would not provide enough of an environmental payback. Romney announced he would not seek a second term right after his RGGI decision.

Romney's successor, Gov. Deval Patrick (D), signed the memorandum shortly after taking office in 2007. “On this day, we want everyone to know that Massachusetts will not stand on the sidelines,” he said at the signing.

In neighboring Rhode Island, Carcieri (R) declined to support RGGI at first, but eventually signed the memorandum of understanding in 2007. Carcieri said he was concerned about how RGGI would impact the cost of energy in Rhode Island, but was then assured that higher costs would be offset. Rhode Island became the ninth state, and the last of the New England states, to join RGGI.

Iwanowicz, the former New York official, said it is important to recognize that Romney had--and Christie probably has--higher national aspirations.

“If you have higher political aspirations and you're a member of the Republican Party, you can't be for policies that cap carbon pollution right now,’’ Iwanowicz said.

Challenge in Maine

RGGI also faced a challenge in Maine this year, when LePage vetoed a bill to implement RGGI's new model rule. The Maine Legislature, however, overrode the veto (44 ER 1939, 6/28/13).

In a June 20 statement, LePage said he vetoed the legislation because it would have favored the wind power project of a private company, Statoil, over a University of Maine wind power project .

RGGI faced a challenge in 2011 in New Hampshire, when the Republican-controlled Legislature approved a bill to withdraw from the program. The measure was vetoed by Gov. John Lynch (D) and the New Hampshire Senate then failed by one vote to override the veto.

In vetoing the bill, Lynch said that if the state left RGGI, ratepayers would effectively continue to pay part of the program's cost while no longer receiving the economic benefits from the auction proceeds.

New Hampshire State Sen. Jim Luther (R), in urging fellow senators to override the veto, said at the time that auctions have been “a terrible failure” and “the markets are showing that this program does not work.”

McCarthy an Early Backer

Connecticut was one of the earliest backers of RGGI, led by Gov. Rell (R) and her commissioner of the Department of Environmental Protection, Gina McCarthy. Rell signed an agreement in 2005 to participate in the regional accord and proposed legislation in 2007 authorizing the state's participation in RGGI.

McCarthy, now the EPA administrator, said at the time that Rell's proposal “sends a powerful message to everyone who uses or produces power in this state that we firmly support energy efficiency, conservation and renewable resources as part of a comprehensive energy plan.”

McCarthy, who was also an environmental adviser to Romney when he was governor, said in a July 30 speech at Harvard Law School that she recognizes most of the efforts that have been successful to date to reduce carbon emissions have come from “my dear states.”

She noted that in addition to the dozen states that have implemented or are implementing market-based reduction programs, more than 25 states have set energy efficiency targets, more than 35 have set renewable energy targets, and more than 1,000 mayors have signed agreements to cut pollution in their cities .

“These local and state officials are leading the charge and we at EPA don't plan to do anything but follow their lead. We will support them and we will work with them as we face the challenges ahead,’’ she said in her first public address after being confirmed as EPA administrator. “We will move forward together.’’

Lessons for Federal Efforts?

Can any lessons from RGGI be transferred to the federal level? “It's a heavier lift,’’ said Iwanowicz, but the appointment of McCarthy as administrator is promising.

McCarthy “understands how to bring parties together, how to move forward on addressing carbon pollution from power plants more so than probably anybody in Washington does at this point,’’ he said.

“She has a lot of work to do, but I think she has the breadth and depth of experience from the RGGI work that she did.’’

The Pace Energy and Climate Center's Litz said, “The RGGI model is going to be very important in the nationwide discussions around how states meet the forthcoming carbon pollution rules from EPA.

“ States should be in a position to use RGGI as a model for reducing carbon pollution from existing power plants,’’ he said. “The benefits of a RGGI-like approach include achieving the reductions at the lowest possible cost, and if allowances are auctioned, funds can be directed to complementary purposes, such as energy efficiency investments.’’


 

With assistance from Martha Kessler and Adrianne Appel in Boston and Jeff Day in Washington.

To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y., at GSilverman@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com