Maine RGGI report 2015: price impact "relatively modest", programs helpful

For 8 years, states in the Northeastern U.S. have participated in the Regional Greenhouse Gas Initiative.  RGGI, the first market-based greenhouse gas regulatory program in the United States, represents a cooperative effort by participating states to cap and reduce greenhouse gas emissions from the electric power sector, coupled with a market for auctioning and trading emission allowances.  While some groups feared that the RGGI program would increase electricity prices, a recent report by the Maine Public Utilities Commission found that the impact of RGGI on electricity prices in Maine has been relatively modest -- while finding that RGGI-funded programs contribute to economic development and reduce greenhouse gas emissions.

RGGI formed in 2007, when ten states -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont -- agreed to first cap, and then slowly reduce, the greenhouse gas emissions of their electrical energy sectors by 10% by 2018.  While New Jersey withdrew in 2012, the program has remained strong; in 2014, the remaining states subsequently tightened the RGGI cap for 2014 from 165 million short tons of carbon to 91 million short tons, then further declining 2.5% per year from 2015 to 2020.

While each participating state adopted its own laws implementing RGGI, in general the RGGI laws require certain generators of electricity to track their carbon emissions and acquire an “allowance” for every ton of carbon dioxide or its equivalent that they emit.  States conduct periodic auctions of allowances, and market participants are free to engage in secondary market trades.  Generators must purchase or trade for enough emissions allowances to match the number of tons of CO2-equivalent emitted.  The cost of acquiring these allowances gives generators an incentive to improve their efficiency or switch to fuels with a lower carbon intensity.

Each state also adopted its own laws governing the use of funds raised by state auctions of RGGI allowances.  In Maine, most funds go to the Efficiency Maine Trust for purposes including measures, investments and arrangements that reduce electricity consumption or reduce greenhouse gas emissions and lower energy costs at commercial or industrial facilities, and for investment in measures that lower residential heating energy demand and reduce greenhouse gas emissions.

RGGI has conducted 27 quarterly allowance auctions since September 2008, through which Maine has received a cumulative total of $ 62.22 million in RGGI auction proceeds.  Maine’s auction proceeds in 2014 totaled $11.37 million. According to the Maine Public Utilities Commission's report:

the annual cost to Maine ratepayers of the RGGI program was approximately $0.0024 per kWh. For the average Maine residential customer using 530 kWh per month, the 2014 RGGI program cost was approximately $ 1.27 per month. For a commercial customer using 25,000 kWh per month the 2014 RGGI program cost was approximately $60.00 per month. A large commercial or industrial customer using 500,000 kWh per month would have had a 2014 RGGI program cost of approximately $1,200 per month.

On the benefits side of the ledger, the Commission's report cites a finding that "all RGGI proceeds since 2008 are expected to return more than $2 billion in lifetime energy bill savings to more than 3 million households and more than 12,000 businesses across the eight states taking part in RGGI."  The Commission also cited its July 2014 report to the Legislature quantifying the increases in employment, real personal income, and gross state product expected to occur in Maine as a result of the cap tightening and other changes implemented in 2014.  That report found:

economic impacts for the New England region include a cumulative increase in Gross Regional Product of over $2 billion, a cumulative increase in employment of 38,900 job-years, and a cumulative increase in real personal income of $1.5 billion including a cumulative increase in Maine Gross State Product of $200 million, a cumulative increase in employment of more than 5,000 job-years, and a cumulative increase in real personal income of $100 million.

Based on these observations, the Maine Public Utilities Commission's 2015 report on RGGI concludes that "the impact of RGGI on electricity prices has been relatively modest, while RGGI-funded programs contribute to the gross state product, job growth, and personal income, and also reduce greenhouse gas emissions."

Senate climate bill proposes carbon fee

Senators Barbara Boxer of California and Bernie Sanders of Vermont have introduced climate legislation that would impose a fee of $20 per ton of carbon or methane equivalent emitted.  The Climate Protection Act of 2013 provides measures designed to "address climate disruptions, reduce carbon pollution, enhance the use of clean energy, and promote resilience in the infrastructure of the United States".  What does the Senate climate bill do -- and what are its chances of passage?

The centerpiece of the Climate Protection Act of 2013 is a fee imposed by the Administrator of the U.S. Environmental Protection Agency on carbon emissions.  Starting in 2014, the carbon pollution fee would be $20 per ton of carbon dioxide or equivalent.  For the next 10 years, the fee would increase by 5.6 percent per year, after which it would hold steady at about $34 per ton.

The fee would apply to any manufacturer, producer, or importer of a carbon polluting substance, defined as coal (including lignite and peat), petroleum and any petroleum product, or natural gas that releases greenhouse gas emissions when combusted or used.  The fee would apply whether the carbon polluting substance is produced in the U.S. or is imported.  As designed, it would be an "upstream" fee, meaning only the first producer or importer of the substance would have to pay the fee directly; subsequent users would not be liable for the fee, although they would likely pay a higher price to acquire the fuel as the the upstream entity passes its costs along.

60% of the funds raised from the carbon pollution fee would be used to provide a monthly residential environmental rebate to legal residents of the United States.  The remainder would be used to create a Pollution Reduction Trust Fund. The Trust Fund would be divided up for five purposes.  $7.5 billion per year would go to the EPA to mitigate the economic impacts of the carbon pollution fee on energy-intensive and trade-exposed industries.  $5 billion shall be available to the Department of Energy to carry out a Weatherization Assistance Program for Low-Income Persons.  $1 billion would go to the Secretary of Labor for job training, education, and transition assistance for individuals employed by the fossil fuel industry.  $2 billion will go to the Advanced Research Projects Agency-Energy program.  The balance shall be used shall be used for federal budget deficit reduction, as would the entire Trust Fund after 2024.

To protect domestic industry against competitive harms caused by the carbon pollution fee, the Climate Protection Act of 2013 also includes a carbon equivalency fee on imports of carbon pollution-intensive goods.  Those goods would include iron, steel, a steel mill product (including pipe and tube), aluminum, cement, glass (including flat, container, and specialty glass and fiberglass), pulp, paper, a chemical, or an industrial ceramic, as well as any other goods whose production is deemed to have similar carbon intensity.

Funds raised the carbon equivalency fee would be split between the EPA and the Department of Transportation.  The EPA would use its share primarily to fund state and local programs that assist communities in adapting to climate change, improving the resiliency of critical infrastructure; and protecting environmental quality and wildlife.  EPA could also use the funds to meet international commitments made by the United States to assist with climate change adaptation.  The Department of Transportation's share would be used to fund state and local programs that assist communities in improving the resiliency of critical infrastructure and for projects that provide preferential parking for carpools, including the addition of electric vehicle charging stations.

Will the Climate Protection Act of 2013 pass?  Congress has previously considered several structures to encourage a shift to lower-carbon energy resources, ranging from creating a national cap-and-trade market to a carbon tax.  To date, none has passed, although individual states and regions have created cap-and-trade programs like the Regional Greenhouse Gas Initiative (RGGI) and the California Air Resources Board market.  President Obama called on Congress to address climate change and carbon emissions in his 2013 State of the Union address, and other jurisdictions such as the Canadian province of British Columbia have enacted a carbon tax.  Could the carbon fee and dividend structure proposed in the Climate Protection Act of 2013 be the solution?  At the least, it will provoke a national dialogue about carbon emissions and the federal government's role in managing them.

3 years of RGGI carbon market results

A report released this week by the Regional Greenhouse Gas Initiative (RGGI) shows that carbon dioxide emissions from power plants in RGGI member states fell by 23% over the program's first three years.

RGGI, the first major market-based greenhouse gas regulatory program in the United States, represents a cap-and-trade approach to reducing the emission of carbon dioxide and other greenhouse gases.  Ten states - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont - originally agreed to cap and reduce the greenhouse gas emissions of their electrical energy sectors by 10% by 2018.  (New Jersey subsequently withdrew from the compact effective January 1, 2012.)  RGGI's first three-year compliance period ran from January 1, 2009 through December 31, 2011.

This week's report documents the performance of the RGGI member states in reducing greenhouse gas emissions from the electricity sector.  According to the report, 97% of covered power plants - 206 out of 211 covered units - met program compliance obligations.  (Raw data on each plant's performance is available through the RGGI CO2 Allowance Tracking System, also known as COATS.)  Over the three-year period, annual CO2 emissions for the three-year period averaged 126 million short tons.  This represents a 23% reduction compared to 2006-2008. 

Part of the reduction may be attributed to increased state investment in energy efficiency as well as the economic slowdown.  However, CO2 emissions in the region decreased nearly ten times more than electricity consumption did: according to the U.S. Energy Information Administration, three-year average electricity consumption across the ten-state region experienced only a 2.4% decrease over the same time. This points to another significant trend in northeastern electricity markets: a shift away from coal to natural gas as the combustion fuel of choice for thermal power plants.

Will NJ stay in RGGI?

The New Jersey Senate has passed a bill which would require the state to remain a member of the Regional Greenhouse Gas Initiative, the carbon cap-and-trade compact covering the Northeast and mid-Atlantic states. The bill, S. 1322, is described as clarifying the legislature's intent regarding NJ’s required participation in RGGI.

RGGI is the first major market-based greenhouse gas regulatory program in the United States.  RGGI represents a cooperative effort by Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.  These ten states agreed to cap and reduce their electrical energy sector's greenhouse gas emissions by 10% by 2018.  Each state was free to develop its own implementation of the compact, including both how carbon allowances would be allocated and how proceeds from their sale would be used.  For example, Maine chose to invest its share of RGGI auction proceeds in energy efficiency, managed by the Efficiency Maine Trust.  A February 2012 report found that, for every dollar of RGGI auction revenues that was invested in energy efficiency in 2010, participating states received $1.3 to $6.8 in total energy benefits, with a weighted average of $2.3 in return on investment.

Last year, NJ Governor Chris Christie vowed to remove New Jersey from RGGI, arguing that RGGI participation represents a tax without producing any measurable impact on the environment.  Democrats in the state legislature introduced legislation (A4108/S2946) to require NJ to remain in RGGI, but in August 2011 Gov. Christie vetoed that bill.

S. 1322 now faces debate before the New Jersey Assembly.  If it passes out of the Assembly, it will then face an anticipated veto from the governor.  Will New Jersey remain in RGGI?

2/24/10: some news from Maine

Maine roundup for today

The announced closure of the Bumble Bee sardine cannery in Prospect Harbor continues to be troubling. 128 jobs to be lost. Governor Baldacci says the state will help find a new business, and could designate the cannery as a Pine Tree Zone, allowing the new owner to be exempt from 80% percent of its employee tax withholding for the next 10 years.

Tissue manufacturer Lincoln Paper and Tissue forecasts 2010 as a moderately successful period of no major investments or substantial new hiring. LP&T's CEO Keith Van Scotter has considered switching the fuel for its steam boilers from No. 2 heating oil to natural gas, but can't do so without help from state or federal government.

Landfill gas to energy: the City of Old Town, University of Maine, and Casella Waste Management have requested $3 million in federal stimulus funding to construct a 6-mile gas pipeline allowing gas from the Juniper Ridge Landfill (operated by Casella on behalf of the state) to flow to the steam plant at the university. Phase I consists of building the pipeline and upgrading the steam plant, and would significantly reduce carbon dioxide emissions. Phase II involves building an electricity generating facility connected to the landfill by a second pipeline. These plans are tied into the nascent Maine Green Energy Alliance, an entity owned by Casella that aims to generate electricity and sell it directly to participating municipalities like Old Town. Landfill gas remains somewhat contentious, with some opposing the project on environmental and fiscal policy grounds.

Maine does have experience with the Pine Tree Landfill in Hampden, also operated (and owned) by Casella. The $10 million Pine Tree Landfill gas project commenced operation in 2008, and is projected to produce enough methane gas to power up to 3,000 homes for 15 years or more. In 2009 a similar project was launched at the Crossroads Landfill in Norridgewock.

Bangor Daily News editorial yesterday lauding Eastern Maine Electric Cooperative (EMEC) for its customer-oriented culture and low prices, noting that the customer-owned utility cut power prices by 10% last year. The editorial is careful not to bash investor-owned utilities, but hints that their profit-to-shareholder motives may result in worse rates or service than customers can get from coops like EMEC.


Elsewhere:

Bloom boxes unveiled. Lots of buzz still, relatively few details. We have learned that commercial-scale units cost $700,000 to $800,000, and that five Bloom Energy Servers deployed by EBay last July produce electricity to power space for 2,000 to 3,000 employees and cut eBay's power bill by $100,000 so far. Interestingly, EBay uses natural gas as the fuel, but plans to convert to landfill gas soon.

Iberdrola anticipates profit growth over the next three years.

The Senate continues to wrestle with the carbon bill, with carbon pricing remaining as the sticking point. Cap and trade? Cap and dividend? Carrot and stick?

01/29/2010

Exciting news from my home town: U.S. Windblade of Bath, Maine is unveiling the first composite underwater turbines built in the U.S. Designed by Portland-based Ocean Renewable Power, two turbines are linked to a 60 kW generator. These first turbines will be installed in downeast Maine (Cobscook Bay) to demonstrate and evaluate the potential for tide/current generation.

Massachusetts has issued its triennial plan for energy efficiency measures. The plans set an electric energy savings target of 2.4 percent of sales in 2012 -- several times more than the 0.8 percent savings through previous measures, and on the opposite side of zero from the about 1% annual load growth of recent years. If Massachusetts utilities pull it off, they anticipate saving 2,600 gigawatt-hours of electricity. Massachusetts anticipates that it could meet nearly 30 percent of its electricity needs by 2020 through energy efficiency measures alone. On the gas side, the plans set a savings target of 1.15 percent of natural gas sales in 2012.

Meanwhile, is cap-and-trade going down in flames? Reports from the World Economic Forum in Davos indicate a business-leader consensus that stimulus, not cap-and-trade, is the more efficient way to change behavior.

And from the Bangor Daily news: