RGGI - One Approach to Carbon Management in the Power Sector€¦ · RGGI –One Approach to Carbon Management in the Power Sector David Farnsworth, Esq. Senior Associate The Regulatory

5 October 2017

CLIMATE CHANGE AND THE LAW – Fall 2017

Vermont Law School

RGGI – One Approach to Carbon Management in the Power Sector

David Farnsworth, Esq.

Senior Associate

The Regulatory Assistance Project®

50 State Street, Suite 3

Montpelier, VT

United States

+1 802 498-0708

[email protected]

raponline.org

mailto:[email protected]

Regulatory Assistance Project (RAP)®

• Introduction: Cap-and-Trade, the Electric Sector

and our Climate

• RGGI

• Observations and Discussion

2

Outline


Where Does Cap-and-Trade Come From?

• Clean Air Act -- Pre-1990 Amendments

• Non-Attainment Offsets

• Bubbling

3

Cap-and-Trade Introduced


Background• Permits to emit are

allocated.

• Additional permits:

• Can be bought at state-run auctions and are

• Available in the form of offsets.

• Emitters can sell excess

allowances that they don’t

need.

• Over time, the program

(and number of

allowances) becomes

more restrictive, limiting

allowed emissions.

4

Cap-and-Trade Introduced

Regulatory Assistance Project (RAP)® 5

To reach carbon reduction goals, e.g.,

80% by 2050, an economy needs to

move away from carbon-intensive

technologies and practices to those

that are cleaner and more efficient.

Carbon Management – It’s About theEconomy


I do not mean, “the economy, stupid!" James Carville, Bill Clinton strategist in 1992 presidential bid against George Bush.


“Turning the economy around is like turning an aircraft carrier around” - M r. Chapin


But Big Ships Have Grown More Maneuverable: Bow-Thruster



Can cap-and-trade policy help maneuver the economy like a bow-thruster moves a ship?


US Federal Carbon Program

• US Environmental Protection Agency’s (EPA)

Clean Power Plan withdrawn by Trump

Administration April 28, 2017

• Clean Air Act – Federalism


• It is changing:

• Data

• Renewables

• Electrification

• Storage

• There are beginning to be alternatives to “plain old”

electric power

12

The Power Sector—a Couple Thoughts


• It is changing:

• How fast?

• Global warming potential of our energy use:

• Example: natural gas (methane, actually)

• 33 X CO2 (100 year)

• 86 X CO2 (20 year)

13

The Climate—a Couple Thoughts


RGGI


We did it with SO2

Let’s do it with CO2

15

Once Upon a Time (2003), Someone Wanted to Run for President


• Nine separate state programs

that look alike and coordinate:

• Emissions cap is made of

emissions from all 9 states

• Cap largely based on

historical emissions

• Fossil-fired electric generating

units ≥25MW

16

RGGI


• Start date of January 1,

2009

• 3-year compliance

periods

• Program Reviews

• 2012

• 2017

RGGI


RGGI States: Pollution Reductions with Economic Growth


• Quarterly regional CO2 allowance auctions

• CO2 allowances are issued by each state

• Compliance occurs at the state level

• One tradable CO2 allowance market - CO2 allowances are fungible

across the multi-state region

• CO2 allowances issued by any participating state can be used for

compliance in any of the participating states

• Auction proceeds invested by the states (more below)

• Centralized allowance tracking and emissions tracking

— Market monitoring of CO2 allowance market

— Limited use (3.3%) of offsets

19

RGGI Mechanics in Brief


• CO2 allowance auctions are open to all

prequalified bidders

• 36 quarterly auctions held since September 2008

• Auction #36, June, 2017

• $37 million raised

• CO2 allowance auction clearing prices have

ranged from $1.86 to $7.50

20

RGGI’s Market Based System


RGGI Auction Clearing Prices Summary


• RGGI states have distributed

approximately 90% of

allowances by auction

• More than $2.58 billion in auction

proceeds through 33 auctions

• Invested $1.37 billion of auction

proceeds in range of energy

efficiency, clean and renewable

energy, direct bill assistance,

GHG abatement programs

RGGI Reinvests in the Energy Sector

RGGI Investments by Category: 2008 – 2014

Source: RGGI 2014 Proceeds Report


• In 2015, over $410 million in

RGGI proceeds invested in

programs including energy

efficiency, clean and renewable

energy, greenhouse gas

abatement, and direct bill

assistance.

• 64 percent – energy efficiency,

• 16 percent clean and

renewable energy.

RGGI 2015 Investments

• Over the lifetime of the projects,

2015 investments are projected

to produce:

• $2.31 billion in energy bill savings;

• 9 million avoided MWh of electricity; and

• 28 million avoided MMBtu of fossil fuel.

See Investment of RGGI Proceeds

in 2015.

http://rggi.us1.list-manage.com/track/click?u=30b3d3096a24600c6bfadf37a&id=ab10b419c5&e=c20b06a266


Public Policy Observations


Cost of Primary Energy Resources2015 Lazard Analysis


Efficiency is low-cost “carbon scrubber”


• One of RGGI’s most important design decisions

was to auction allowances (rather than give them

away for free) and

• To invest auction proceeds in energy efficiency

and other clean energy programs

27

The Role of Revenue Recycling


• RGGI auctions raised nearly $1B in its first 3 years

• States invest in existing clean energy and other

programs:

• 1st Compliance Period -- Net benefits: $1.6B

• 2nd Compliance Period -- Net benefits: $1.3B

28

The Role of Revenue Recycling


• Today, ≥60% of RGGI auction revenue dedicated

to EE programs:

• Saving consumers money

• Reducing emissions

• Delivering economic benefits 29

Cap-and-Invest: Role of Revenue Recycling


Reductions come, less

from the program’s price

on carbon, and more

from investing the

program proceeds

Cap-and-Invest Program


Reductions come, less

from the program’s price

on carbon, and more

from investing the

program proceeds

Cap-and-Invest Program


Observations and Discussion


• Cap-and-trade can support:

• Auctioning

• Investment

33

Some Observations

• Cap-and-trade can be

coordinated with clean

energy policies

• Energy Efficiency

• Renewable Energy

• Demand Response

• Transportation


• Cap-and-trade must be integrated into a larger

carbon strategy – remember the complementary

policies (EE, RE, Electrification)

• Coordination is important

• How should the program work with other state air

pollution and clean energy policies?

• Is a ton a ton?

• Integrated Resource Planning IRP tells us to ask: “Are we

getting the cheapest tons first?

• Why pay more than you have to?

34

Some More Observations


• Is an economy, in fact, like a big unwieldy ship,

hard to turn and maneuver?

35

• Can a policy like cap-and trade work like a bow

thruster, maneuvering it in the direction we want?


Thank You

Questions


Carbon Caps and Efficiency Resources: How Climate Legislation Can Mobilize

Efficiency and Lower the Cost of Greenhouse Gas Emission Reduction, R. Cowart

(Vermont Law Review 2008 )

Climate Issue Brief #4, State Clean Energy Policies: The Foundation for an Electric

Sector Cap-and-Trade Program, National Association of Regulatory Utility Commissioners

Quantifying the Air Quality Impacts of Energy Efficiency Policies and Programs, J.

Shenot (RAP)

Images and How We Remember History, D. Farnsworth

Climate Policy and Affordability: Advocacy Opportunities in the Northeast, Farnsworth,

D’Antonio , and Pike-Biegunska

Carbon Trading in China: Progress and Challenges, P. Parenteau and M. Cao, Mar. 2016

The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast

and Mid-Atlantic States Review of the Use of RGGI Auction Proceeds from the First

Three-Year Compliance Period, Hibbard et al, Nov. 5, 2011

37

Resources

http://lawreview.vermontlaw.edu/articles/12 Cowart Book 2, Vol 33.pdf

http://www.naruc.org/Publications/ClimateIssueBrief4_Jul2009.pdf

http://www.raponline.org/wp-content/uploads/2016/05/rap-shenot-eedataforairregulatorsfinal-2013-aug-13.pdf

http://www.huffingtonpost.com/david-farnsworth/images-and-how-we-remembe_b_604784.html

http://www.raponline.org/docs/RAP_Farnsworth_ClimatePolicyinNortheast_2009_09_18.pdf

http://www-assets.vermontlaw.edu/Assets/elc/Parenteau.March2016.pdf

http://www.analysisgroup.com/uploadedFiles/Publishing/Articles/Economic_Impact_RGGI_Report.pdf

About RAPThe Regulatory Assistance Project (RAP)® is an

independent, non-partisan, non-governmental

organization dedicated to accelerating the transition

to a clean, reliable, and efficient energy future.

Learn more about our work at raponline.org

David Farnsworth, Esq.

Senior Associate

The Regulatory Assistance Project®

+1 802 498-0708

[email protected]

raponline.org

50 State Street, Suite 3

Montpelier, VT

United States

http://www.raponline.org/

mailto:[email protected]

Documents

RGGI - One Approach to Carbon Management in the Power Sector€¦ · RGGI –One Approach to Carbon Management in the Power Sector David Farnsworth, Esq. Senior Associate The Regulatory