The number of allowances available is set by each state's CO₂ Budget Trading Program and sold at an auction run by RGGI, Inc and traded on something like a commodity trading market. Over time the allowances available will decrease, and the intent is that as the state's electric demand rises, the cost of the allowances would rise, and the producers would implement various efficiencies to reduce their CO₂ emissions.
This presupposes two things. First, that CO₂ emissions cause global climate disruption (that's the current preferred term), and second, that electrical demand will rise. The former is being called more and more into question as effects like the transition from a warm mode of the "Pacific Decadal Oscillation" to a cold mode bring more La Niñas and fewer El Niños, and reduced solar activity reenergizes the debate about the Sun's role in climate. The latter is the great recession starting in 2008 has reduced energy demands as factories have closed.
The result is that the CO₂ allowance auctions have been undersold, and hence allowances were sold at the floor price of $1.86 per ton for auctions 8-10. It wasn't supposed to be like that. The highest sale price, $3.51 in auction 3 (March 2009) was supposed to be a stepping stone to prices of $10-$15 per ton.
The money raised at the auctions goes back to the states, with the intent that it be used to fund various conservation projects ranging from insulating homes to helping electricity producers become more efficient.
As the recession strengthened, the public's concern about global warming waned due to predictions falling short, various winter events affecting millions of Americans, and having bigger problems like buying heating oil or paying the mortgage.
In 2010, some RGGI states (NH, NJ, NY) redirected some RGGI revenues to their general funds to help balance their budgets, and all of a sudden RGGI looked more like a "stealth" tax than a source of conservation funds. Also, the republican victories that year changed the face of many state legislatures and people began to realize they might be better off without RGGI.
Legislative action began in 2011, and that is the focus of this web hierarchy. The focus on this page will be on a chronology of events and the current status of repeal efforts.
The ultimate goal of this effort is not to get individual states out of RGGI, but to shut down RGGI Inc. altogether. Not all ten states need to withdraw, just enough to make RGGI pointless to continue.
... the Participating States have conducted a comprehensive program review. Proposed amendments to RGGI have been incorporated in an Updated Model Rule released on February 7, 2013.The program review reports:The Updated Model Rule will guide each state as it follows its own statutory and/or regulatory procedures to propose updates to its CO2 Budget Trading Program.
- A significant excess supply of allowances relative to actual emission levels in the region.
- The current cost control measures in the program, which are based upon expansion of the percentage of offset allowances allowable for compliance, would likely be ineffective in controlling costs if the emissions cap is made binding.
Their "fixes" include reducing the cap in 2014 (from 165 million to 91 million tons), further adjustments to deal with proactive purchases by producers, and creating a pool of allowances to sell if open market price goes too high.
Auction 11, held one year ago, was oversold, with offers for 110% of the available allowances. Perhap compliance entities are getting more confident that allowances will be available when they need them. Only 1% of the allowances went to non-compliance entities, so the market for allowances remains moribund.
The 63% sold is much more than I expected.
The 2012 program review is expected to examine the Regional Greenhouse Gas Initiative's (RGGI) successes and operations, whether it can achieve additional emission reductions, and whether it has caused higher emissions outside its 10 member states' borders. Businesses and market participants hope the nine participating northeast US states will choose to tighten the program’s cap during its second control period, which will run from 2012 to 2014. Because of a drop in GHG emissions due to the economic recession, the electric sector carbon market is oversupplied with allowances, leading to low prices that many believe aren't encouraging a transition to cleaner fuel sources in the region.
Governor Christie is expected to veto the first and ignore the second.
It appears power producers have been approaching purchasing allowances on a calendar year budget, a similar pattern happened last year too.
16 votes are needed to be able to override an expected veto from Gov. Lynch. (It has to go through the Senate Finance committee, a house/senate conference committee and maybe a couple others first.)
One thing the committee considered was an amendment introduced by Sen Bradley that rewrote the enitre bill. It removes much of the controversial funding of various groups, training, and insulation subsidies, leaving only some money for the "core" energy efficiency programs and funds it with $1.00 of the money received from each carbon allowance sold. (Currently a minimum of $1.89.) The remaining money will be given to ratepayers on a per-kwh basis.
It also changed the withdrawal trigger from the end of the year to when states representing 10% or more of the RGGI allowances leave RGGI. Apparently that was changed to just the New England states, but I'm not clear on the details. Apparently Sen Bradley withdrew the amendment saying it wasn't ready. Without Bradley's amendment there may not be enough support for the bill in the full senate, or at least, not enough to provide a veto-proof majority.
My testimony for the hearing is at http://wermenh.com/rggiwatch/enr_testimony.html .
RGGI.com, not surprisingly, is home to many reports looking at multiple states. Their RGGI Benefits reports all the good, and ignores most the bad.
The November 2011 release of a study by the Analysis Group of The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast and Mid-Atlantic States manages to turn some negatives into positives, e.g.:
The States Have Used CO2 Allowance Proceeds Creatively - Supporting Diverse Policy and Economic Outcomes
The states' use of allowance proceeds not only provides economic benefits, but also has helped them meet a wide variety of social, fiscal, and environmental policy goals, such as addressing state and municipal budget challenges, ....
One major criticism of RGGI is that four states used RGGI funds to help balance their budgets even though RGGI proceeds meant for energy related programs. A budget "challenge" is a nice way to say "shortfall." It also provides strong support to people who point out that the CO2 allowances are not a fee, not part of the free market, but a tax.
A partial refutation comes from The Institute for Energy Research which focuses on increases in electricity bills and the differences in how the benefits and harms are computed.
The "news and opinion" links include some that oppose the repeal effort. While this page is strongly biased for repeal, I won't exclude the other side. Besides, some of their arguments help support the repeal.
Connecticut
DelawareIt was tabled on May 11 and hence will not go to the full house.
MaineSec. 5. Withdrawal from regional greenhouse gas initiative. Notwithstanding any other provision of law, the Department of Environmental Protection shall take all necessary steps to withdraw the State from all memoranda of understanding and state contracts with other states relating to the regional greenhouse gas initiative authorized pursuant to the Maine Revised Statutes, Title 38, section 579 and chapter 3B. Upon successful completion of the withdrawal, the department shall submit legislation to the Legislature making necessary changes to laws relating to the regional greenhouse gas initiative.
However, the billed was rejected by the Energy, Utilities, and Technology Committee which also reaffirmed an original condition to Maine's participation in the program - specifically that New England states producing a minimum of 35 million tons of the annual carbon dioxide emissions budget must continue to participate in the program.
I know nothing about that condition, and will look into it when I get a chance.
News and opinion:
2011 May 11: Environment Maine reports:
The Energy, Utilities, and Technology Committee today rejected a bill, LD 793, which would have withdrawn Maine from the Regional Greenhouse Gas Initiative (RGGI). Instead, it reaffirmed an existing condition for Maine's participation in the RGGI program.The amendment approved today reaffirms an original condition to Maine's participation in the program - specifically that New England states producing a minimum of 35 million tons of the annual carbon dioxide emissions budget must continue to participate in the program.
No Maine businesses testified in support of the bill at the public hearing in April. In contrast, several large companies that have received RGGI grants, including Moose River Lumber, Twin Rivers Paper, GAC Chemical, Maine Wild Blueberry, Mt. Abram, Portage Wood Products, Jackson Laboratory, and Sunday River sent the Committee a letter saying that "Businesses like ours have benefited directly from RGGI funds because the money has supported investments that reduce energy costs and allow us to operate more efficiently and profitably." The companies urged the Committee to "...ensure that businesses like ours and the state as a whole can continue to benefit from the program by using the RGGI program to leverage additional investments in cost-effective energy efficiency, including in Maine's industrial sector, where such opportunities abound."
The first I heard about the bill's introduction was from a Maine Public Broadcasting Network story that takes a mostly dim view of the bill.
MarylandThe Analysis Group report says that Maryland has put some RGGI proceeds into the general fund, something I hadn't seen in other sources. They also use the majority of the funds for "Direct bill assistance," which certainly does not help the goal of reducing CO₂ emissions.
MassachusettsA new analysis by the Beacon Hill Institute (BHI) shows that the state's green energy policies will cost Massachusetts ratepayers more than $9.8 billion over the next decade. These costs will be in addition to the market prices for energy, already among the highest in the nation.Full studyThe Commonwealth of Massachusetts imposes 25 unique green energy mandates and programs upon consumers and businesses. BHI examined the costs of 11 of those 25 mandates and programs. It focused only on impacts to ratepayers, not to taxpayers. Thus, its estimates are considerably below what would be expected if costs of all mandates and programs were quantified for state ratepayers and taxpayers.
New Hampshire2011 bill: NH
HB 519-FN
Title:AN ACT repealing New Hampshire's regional greenhouse gas
initiative cap and trade program for controlling carbon dioxide emissions.
The bill should have passed the house, gone through the House Finance committee, then the Senate (and committees), and then the governor, who would veto it. However, while the house margin is veto-proof, the senate's margin was one vote short of a veto-proof majority. Sen. Jeb Bradley introduced an amendment that rewrote the bill. His bill would keep NH in RGGI, but only allow the state to keep $1.00 of the proceeds from each allowance, with the rest being returned to taxpayers. That amendment passed with that one extra vote.
However, the house was intent on repealing RGGI, and didn't go along with the senate during the conference committee. Instead, they attached their bill to a shoreland protection bill, which passed the senate with that not quite a veto proof majority. Governor Lynch vetoed the bill in early July, saying "I am vetoing this legislation because it will cost our citizens jobs, both now and into the future, hinder our economic recovery, and damage our state's long-term economic competitiveness."
The legislature considered a veto override vote late in the summer and the Senate failed to override. The 2011 auctions didn't bring in enough money to cover the grants that were made, and the account ended the year $600,000 in debt.
The first 2012 auction brought in $2 million, which will cover the excess grants but likely not keep pace with last year's rate.
For 2012, the New Hampshire House attempted to get NH out of RGGI again. The is very different than last year's bills and gets NH out of RGGI over a 2-3 year period.
Much like 2011, the house passed with a large veto-proof majority. The senate balked, and Sen. Jeb Bradley introduced an amendment that rewrote most of the bill much like last year, and that passed with a minimal veto proof majority. Gov. Lynch did not veto the bill and it quietly passed into law late in June.
The amended analysis section of the bill says, with editing, that it:
Now the funds will be used to help power producers run more effciently and cleanly.
2013 bills:
House Bill 306 implements the reductions in the RGGI CO2 allowances proposed by RGGI in February.
House Bill 630 and SB123 changes the allocation of money from RGGI auctions that isn't returned to ratepayers to change from 100% to the core energy efficiency program that supports electricity producers to 85% to that and 15% (at least 15% in HB630) to the low-income core energy efficiency program.
News and opinion:
http://www.foxnews.com/opinion/2011/02/28/giant-leap-forward-new-hampshire-smacks-cap-trade/
New JerseyGovernor Chris Christie made the first bills moot on May 26 by announcing he is withdrawing NJ from RGGI at the end of 2010. The legislature responded by introducing and narrowly passing bills to require NJ to be in RGGI. These bills modify the 2007 legislation to change words like may and should to be must and shall and do other things to make it clear the legislature was not making RGGI optional.
It appears the legislature will not be able to override the certain veto from the governor, so the bills are likely just political posturing but may be useful in future legal challenges.
One down, nine to go! And a rather big one at 13.3% of the 10 state region. When New Jersey withdraws, RGGI will be split into two disconnected subregions, with Maryland and Delaware connected to no other RGGI states.
In January 2012, the state legislature introduced Senate Bill S-1322 that would require the state to rejoin RGGI. The Senate passed the bill in March, the Assembly passed in May, Governor Christie has stated he will veto the bill.
Meanwhile, Environment New Jersey and the National Resources Defense Council filed a lawsuit on June 6 against Governor Christie and the state Department of Environmental Protection for withdrawing from RGGI.
Useful sites:
Your
RGGI Repeal Resource!
This is an AFP page that has links to various aspects about the repeal effort
for New Jersey.
No NJ Cap & Trade
A NJ-centric blog on the NJ effort created by Americans for Prosperity.
There are also several references to activity in New York.
News and opinion:
2011 June 24: NJ
Legislators Working to Block Christie's Carbon Market Exit
Legislators admit that the governor would likely veto the measures if they land
on his desk. But the sponsors remain hopeful that their bills, which try to
limit Christie's power on the issue, could at least influence future lawsuits
or other enforcement actions over the state's participation in the Regional
Greenhouse Gas Initiative (RGGI).
2011 May 26: New
Jersey announces intent to pull out of RGGI cap and trade -
Christie strikes major blow
Links to news stories on the subject report that Christie will not allow
new coal-fired electric plants in the state and intends to make NJ #1 among
the off-shore wind turbine power production sites.
2011 May 10: Ocean
Spray cites tax for move
[Ocean Spray Executive] Haines told [Senator] Allen the Regional Greenhouse
Gas Initiative helped lead to last week's announcement Ocean Spray is leaving
Bordentown City for Lehigh Valley, Pa.
That will be interesting. RGGI Inc is supposed to keep an eye on businesses moving in and out of the state. It will be interesting to what they have to say, and when.
However, the good news is, the cap and trade repeal bill already has the backing of 45-lawmakers from the new jersey senate and general assembly.
2011 Apr 20: Democrat State Senator Paul Sarlo publicly announced his co-sponsorship of the repeal effort
2011 May 10: NBC 40 says However, the good news is, the cap and trade repeal bill already has the backing of 45-lawmakers from the new jersey senate and general assembly.
New YorkThe key points of the complaint are:
The lawsuit is pretty easy to follow, I'm surprised it's recieved little news coverage. (Actually, I'm not surprised. My opinion of the news media is nearly as low as it can be.) I don't see how New York can respond to this suit except by passing legislation to require participation in RGGI or by pulling out. The federal issue may be ignorable since this is filed in state court.
On 2012 June 12, the lawsuit was rejected without considering the plaintiffs' claims. From the SPR Law blog comes this clear summary:
The court held that plaintiffs lacked standing to bring the lawsuit because they did not suffer a distinct injury. It also ruled that plaintiffs' claims would have been barred (regardless of their lack of standing) based on their failure to bring a timely challenge. The court agreed with the state defendants' arguments that businesses have adjusted their practices based on RGGI, numerous programs would lose funding if RGGI were invalidated, and that plaintiffs provided no reason why their action was delayed until 2011, approximately six years after the RGGI program was adopted in New York.
Meanwhile, on May 24th, NY Assemblyman Christopher Friend filed Bill A10377 which would pull New York out of RGGI along with other compacts and programs not voted on by the state legislature:
Assembly Bill A10377The state shall not enter into any compact, program, or other legal agreement of any kind with any other state or foreign government that imposes legal or regulatory requirements on new york state residents unless such compact, program, or other legal agreement is enacted, approved, or ratified through the passage of enabling legis- lation. any compact, program, or other legal agreement which conflicts with the provisions of this section shall be null and void.
News and opinion:
2011 Jun 28: Suit hits Cuomo, DEC, NYSERDA over cap-and-trade
This article has details about the lawsuit described above.
2011 Nov 3: November Speaks: New York's Nineteenth District Rejects Hall, Cap-and-Trade
2012 Jul 13: The Sive, Paget & Riesel environmental law firm's blog is the source for the note above about the lawsuit's dismissal. The blog is worth visiting because it's one of the few sites I've encountered that is not excessively biased one way or another.
2012 Aug 26: RGGI is meant to encourage power plant operators to make their plants more efficient. It can also depress the value of a coal fired plant, providing justification to reduce the taxes on the plant. Even with that, a plant may not be economical to operate, much to the chagrin of the immediate area.
The Niagara Gazette reports on the transfer of the largest coal fired plant in New York from the old bankrupt operators and cites RGGI as one of the challenges for the plant. Excerpts:
The group discussed roadblocks the coal plant has had to navigate.One of them is the Regional Greenhouse Gas Initiative. Members of the group at Somerset said RGGI is endorsed by environmentalists and penalizes coal and gas-fueled power producers in favor of solar and wind energy. Since RGGI was adopted, AES has been on a down slide, according to the plant managers.
The group instead endorses the state's Energy Super Highway efforts - which Gov. Andrew Coumo is pushing - to get electricity from upstate sources to downstate customers - principally New York City. The energy highway would update the infrastructure with a billion-dollar effort.
However, the state is also considering a project to pipe power downstate from Ontario through the Hudson River or bringing electricity in from New Jersey. The Garden State opted out of RGGI, giving New Jersey an advantage.
Engert said that RGGI, shifted the burden onto the taxpayer. The town has had to renegotiate its Payment in Lieu of Taxes agreement (PILOT) three times with the AES. With AES payments down, school, county and town taxes go up.
There is an effort for full repeals of RGGI and Corwin said withdrawal from the compact is possible. Environmentalists are fighting to save it.
"It hurts New York state business," said Goodenough who is chief operating officer for the new endeavor. "It has had a reverse affect."
Rhode Island
VermontNHPR's Amy Quinton offers the first news item I've seen that looks beyond getting one state out of RGGI to the goal of taking down RGGI, albeit reluctantly:
Anthony Leiserowitz, with the Yale University Project on Climate Change, says if New Jersey steps out it could deal a death blow to RGGI.
"How it plays nationally however is that it just seems to accelerate this sense that the country as a whole and in particular Republicans and Conservatives in this country are really climbing out on a limb farther and farther away from climate science."
Umm, Anthony, climate science isn't that simple. Don't make me go there....
By the way, Amy Quinton has done a very good job covering RGGI issues in New Hampshire. This story was referenced in a footnote in the complaint filed in the New York Supreme Court so people outside of New Hampshire have taken note too.
This table summarizes the winning bids for the RGGI auctions to date. Follow the links to the summary and full auction reports. These have some important information not covered in these pages, e.g. the number of allowances won by power producers vs. speculators hoping to sell allowances for a profit. In auction 6, 35% of the allowances went to speculators. In auction 10, speculators had lost interest and only bought 3% of the available allowances. In auctions 9 and 10, fewer allowances were bought than were offered, so I assume power producers have plenty to run through the end of 2011.
Perhaps not - Auction 11 was sold out! However, the ratio of allowances bid vs available dropped from auction 7 the year before from 2.3 to 1.1. More allowances were available, possibly because the two preceeding auctions were undersold, but both the number of bidders and bids did drop. Indeed, auction 12 results show the lowest interest in allowances yet, only 30% of the current period allowances sold, surely power producers have nearly all they need this year. I expect only 10-20% of available will sell in the remaining auctions. The future period sales will do better, but will struggle to be fully sold.
Auction 13 sold 17.7% of the current control period allowances and none of the 2012-2014 control period allowances. So much for my thought that producers would start buying allowances for next year. Apparently producers are happy with the allowances they have, or they're confident they can buy whatever they need next year and aren't worried about commodity traders trying to force up the price. I now expect auction 14 to sell only the current period allowances producers need and none of the next. That turned out mostly wrong - 63% of the current period allowances sold in December. Perhaps producers are deferring their purchases, confident that many allowances will be available. That would support the 0% of future period sales.
All the 2012 auctions, 15-18, continued similar bidding suggesting that producers are confident that what they need will be available.
In 2013, The RGGI folks proposed reducing the 2014 allowance cap by 45%, which brought a 50% increase in the auction price for the first two 2013 auctions.
It also brought institutional speculators back into the market, and they bought some 30% of the offered allowances. The number of allowances sold jumped too, from 20 million in December (of some 40 million offered) to 38-39 million in the first two 2013 auctions.
The columns named bids::supply reflect the interest in each auction. When the value is greater than 1, it means some people were outbid. Done well, those people don't need the allowances for that quarter, and deliberately bid low. They should be back the next quarter with a more competitive bid as they get closer to needing allowances. (They can also buy allowances between auctions on the open market, but there is very little activity there now.)
Auction Current
control
periodPrice bids::
supplyFuture
control
periodPrice bids::
supply20: 2013 Jun 2012-
2014$3.21 2.1 2015-
2017
No
auctionn/a 19: 2013 Mar $2.80 2.2 n/a 18: 2012 Dec $1.93 0.53 n/a 17: 2012 Sep $1.93 0.65 n/a 16: 2012 Jun $1.93 0.57 n/a 15: 2012 Mar $1.93 0.62 n/a 14: 2011 Dec 2009-
2011$1.89 0.63 2012-
2014n/a 0.00 13: 2011 Sep $1.89 0.18 n/a 0.00 12: 2011 Jun $1.89 0.30 $1.89 0.51 11: 2011 Mar $1.89 1.1 $1.89 1.4 10: 2010 Dec $1.86 0.57 $1.86 0.55 9: 2010 Sep $1.86 0.75 $1.86 0.61 8: 2010 Jun $1.88 1.3 $1.86 1.2 7: 2010 Mar $2.07 2.3 $1.86 0.98 6: 2009 Dec $2.05 2.6 $1.86 0.74 5: 2009 Sep $2.19 2.5 $1.87 1.1 4: 2009 Jun $3.23 2.6 $2.06 1.5 3: 2009 Mar $3.51 2.5 $3.05 2.3 2: 2008 Dec No
auctionn/a 2009-
2011$3.38 2.5 1: 2008 Sep n/a $3.07 4.1
New Hampshire's HB 519-FN nearly was amended with something to set the withdrawal trigger to other states withdrawals representing 10% the "load." It didn't define what that is, but I looked at the number of CO2 allowances sold in Auction 11 and came up with the following table. It was useful to help understand the amendment, and will be for other purposes.
RGGI footprint size state or
region1,000s of
allowances% of
region% of
totalCT 2,058 16.5 4.9 ME 1,257 10.0 10.0488 3.0 MA 6,571 52.5 15.6 NH 1,659 13.3 4.0 RI 658 5.3 1.6 VT 306 2.4 0.7 New
England12,509 100.0 29.8 DE 1,206 4.1 2.9 MD 7,528 25.5 17.9 NJ 5,595 19.0 13.3 NY 15,153 51.4 36.1 non-NE 29,482 100.0 70.2 Total 41,991 100.0
Contact Ric Werme or return to his home page.
Started 2011 March 6. Graphics by Hannah Werme, with base map data from National Atlas.