RGGI states comment on Clean Power Plan

Friday, January 29, 2016

The nine Northeastern and Mid-Atlantic states participating in the Regional Greenhouse Gas Initiative (RGGI) have submitted joint comments to the United States Environmental Protection Agency in connection with its Clean Power Plan rule.

RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce carbon dioxide emissions from the electric power sector.  The program establishes a regional cap on the amount of carbon dioxide that power plants can emit through the issuance of a limited number of tradable allowances.  RGGI's first three-year compliance period began on January 1, 2009, making it the nation’s first market-based emissions trading program to reduce greenhouse gas pollution.

On August 3, 2015, the EPA announced its "Clean Power Plan," new regulations limiting power plant carbon emissions under Section 111(d) of the Clean Air Act.  While states are free to build their own compliance plans, the rule establishes emission guidelines for states to follow in developing plans to reduce greenhouse gas emissions from existing fossil fuel-fired electric generating units.  The rule also encourages states and regions to work together in developing compliance plans.

States are now tasked with developing their compliance plans.  The Clean Power Plan gives states until September 6, 2016, to either submit a final carbon-cutting plan or to submit an initial plan along with a two-year extension request.  Many observers have noted that for states already participating in RGGI, that program may be able to serve as a mechanism for Clean Power Plan compliance.  This prospect is natural, as RGGI and the Clean Power Plan share some common goals and features.

This week, the nine RGGI states submitted joint comments to the EPA on the Federal Plan (FP) and Model Rules (MR) proposed as part of the Clean Power Plan.  In those comments, the RGGI states "welcome EPA's continued recognition that well-designed multi-state, market-based programs like RGGI can deliver cost-effective emissions reductions."

In an accompanying press release, the RGGI states note their own "track record of success."  As cited in the joint comments, the "RGGI states have seen benefits to the economy and public health, as well as consumer savings, experiencing 8 percent GDP growth across the region while reducing power sector carbon pollution by more than 40 percent since 2005," while maintaining electric reliability.

Based on this experience, the RGGI states encouraged EPA to select mass-based approaches as the most cost-effective, transparent, and reliable way to achieve emission reductions.  (Mass-based approaches set limits on the total mass of carbon allowed to be emitted -- like 100 million tons.  By contrast, rate-based approaches might limit the rate of carbon emissions per unit of useful electric energy.)

Recognizing that trading platforms can play an important role in markets, increasing participation, access, and liquidity, the RGGI states urged EPA to "adopt a trading platform that is flexible and customizable to encourage broader trading markets."

The RGGI states also asked EPA to encourage auctioning of carbon allowances, and reinvestment of the auction proceeds.  In so doing, the RGGI states pointed to their own reinvestment of RGGI auction proceeds in efficiency and consumer relief.

Finally, the RGGI states encouraged EPA to prevent "leakage" of carbon emissions from existing sources to new sources, by including new sources in a mass-based program or some other equally effective alternative method of allocation.

With states now working to develop Clean Power Plan compliance strategies, how will the RGGI experience shape state plans to comply with the Clean Power Plan?

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