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The Northeast’s Global Warming Plan: A Primer 6/30/2006 RGGI.pdf

Executive Summary

As the new home of MASSPIRG's environmental work, Environment Massachusetts can be contacted regarding this report.

The Regional Greenhouse Gas Initiative (RGGI) is the first regional policy on climate change in the United States, and could pave the way for future efforts to control global warming pollution
at the state level or to create a national program along the lines of the worldwide Kyoto Protocol. RGGI will cap carbon dioxide emissions (CO2, the major cause of global warming) from electric power plants, which are one of the two largest sources of emissions in the Northeast, along with transportation.

Seven Northeast governors (from Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont) signed a “Memorandum of Understanding” (MOU) adopting RGGI on Dec. 20, 2005.1 Staff assisting with the development of RGGI released a draft “Model Rule” on
March 23, 2006, which they expect to finalize in July after a comment period. Each state will then adopt its own regulations for the program, using the Model Rule as a baseline. Two other states that participated in the development of RGGI, Massachusetts and Rhode Island, might yet join, and Maryland recently adopted legislation that would result in that state joining the program as well.

RGGI will come into force in 2009 and will require that CO2 emissions from power plants in the region remain constant through 2014, and then fall 10% by 2018.

RGGI will utilize a “cap-and-trade” system: the states will set limits (caps) on emissions and then issue permits (allowances) equal to the tons of CO2 allowed by the cap. Power generators are then allowed to buy permits from each other (known as trading).

What are the dangers of global warming?

The earth’s temperature is rising, due to emissions of global warming pollutants, primarily CO2. Scientists now believe that in coming decades this will have dramatic effects on our climate, making the planet hotter and weather patterns more erratic
and damaging. Results could include:

• Increased frequency and severity of storms, floods, and droughts.
• Melting of glaciers and the polar ice caps, raising sea levels and possibly causing a “mini ice-age” in Europe due The Basics 5 to disruption of the Gulf Stream current that brings warm air to that continent.
• Ocean levels rising to cover shoreline and low-lying land, displacing millions of people.
• Increases in infectious diseases, such as the West Nile virus.
• Loss of native tree, plant, and animal species due to temperature increases.
• Disruption of agriculture and other industries.

Climatologists suspect that global warming is also leading to increased intensity of tropical storms, such as Hurricane Katrina. The number of intense Atlantic hurricanes has increased significantly in the past three decades.

Why focus on power plants?

Releases of CO2 account for four-fifths of global warming pollution, and in the United States electricity power plants account for the largest share of CO2 emissions (although in the Northeast they are now second to transportation). Power plants are also the easiest sector to address through state and regional policies. First, state governments have regulatory authority
over electricity generation, while the federal government has most of the authority over pollution from cars and other transportation. Second, most electricity is generated at a fairly small number of plants, which are easy to identify and clean up. In contrast, the other sources of global warming emissions, such as use of oil and natural gas to heat buildings and run industrial processes, are far smaller, more numerous, and harder to control.

How did RGGI come about and where does it stand now?

In 2003 Governor George Pataki of New York invited all the governors in the Northeast to join New York in creating a regional plan to reduce emissions from power plants. Eight other governors, including those from all six New England states, New Jersey, and Delaware agreed to participate. Two governors—from Pennsylvania and Maryland—chose not to join but to be “observers” in the process of developing RGGI.

For two years, beginning in late 2003, an interstate group of staff, mostly from the state environmental agencies, known as the State Working Group (SWG), developed a plan for RGGI. A 25-member body of “stakeholders” was created, including representatives of electricity generators, electric utilities, other businesses, residential consumers, and environmentalists. The SWG and the stakeholders met a number of times to discuss issues, hear from experts, and review economic modeling that was done to forecast the impacts of RGGI based on different options for how it would operate.

On August 24, 2005, the SWG released a draft plan for RGGI. Stakeholders reacted to the draft and some requested that changes be made. On December 20, 2005, the governors of seven states issued a “Memorandum of Understanding” adopting a revised plan for RGGI, with Massachusetts and Rhode Island refusing to sign.

Although RGGI is a regional plan, there is no regional government, and each state must adopt its own regulations or laws for RGGI to come into effect. The SWG is now developing a “Model Rule” for state governments to use in adopting RGGI. A draft of this Model Rule was released in March. After a comment period and revisions, the Rule is expected be finalized in July 2006.

Each state will go through its own decision-making process, with the legal requirements varying among states. It is expected that in most states the necessary regulations can be adopted under existing authority by the environmental and energy regulatory agencies. But in some cases, the legislature 6 The Northeast’s Global Warming Plan will need to ratify regulations, or pass new laws to institute all of RGGI or particular aspects of the plan.

What is “cap and trade” and how does it work?

Traditional environmental regulations required each regulated facility, such as an industrial company or a power plant, to use “best available technology” to reduce air or water pollution, or to cut emissions by a certain amount. More recently, in an effort to reduce the costs of complying with regulations, pollution limits have been set on an entire industry or a geographic region rather than on individual plants. Each plant is given or allowed to buy emission permits,
which it can then trade or sell to other firms. The theory is that some plants will be able to cut pollution more cheaply than others. Those that can do so inexpensively will sell permits to those whose costs of compliance are higher. In this way, the overall cost of meeting pollution reduction goals will be kept down.

In the United States, cap and trade has been used for two air pollutants, sulfur dioxide and nitrous oxides, but has not yet been used for carbon dioxide (CO2). In the case of CO2, plants could cut their emissions by making their operations more efficient,by switching from higher emitting to lower emitting fuels (such as from coal to natural gas), by shutting down in favor of more modern, less-polluting plants, or potentially by using technologies currently in development to capture CO2 and store it permanently underground before it enters the atmosphere.

Power plant owners would have another option, the use of “offsets,” which are methods of reducing global warming pollution at facilities other than power plants. These include, for example, planting trees (which absorb carbon dioxide from the atmosphere) or capturing and burning methane from landfills (unburned methane gas is a very potent cause of global warming if released to the atmosphere).

How much will RGGI do to help contain global warming?

RGGI is an important step along the road to the strong policies that are needed to stop global warming. Many scientists now say that global warming pollution from all sectors of the economy must eventually be cut by 75% to 85% in order to stabilize the climate. RGGI is designed to cut emissions from the electricity sector 10% from 2009 levels by 2018.

RGGI also has additional value in creating a model for the rest of the United States to follow. While the Northeast is responsible for only a small portion of total U.S. emissions, the region is prepared to show leadership in reducing its contributions to the problem.

Moreover, RGGI will encourage the development of technologies and practices that reduce CO2 emissions by making those reductions economically valuable. Such technological advancements will help the Northeast and other parts of the country to make the deep, long-lasting cuts in CO2 pollution that are needed to stabilize the climate.