2010/02/23 High Marks for Nation's First GHG Cap and Trade System Press
High Marks for Nation's First GHG Cap and Trade System
For Immediate Release
February 23, 2010
Contacts:
Peter Shattuck, Carbon Markets Policy Analyst: (617) 742-0054 or (857) 636-2502 (cell)
Emily Avery-Miller, External Relations Manager: (207) 236-6470
Rockport, ME — This January marked one year of successful operation for the Regional Greenhouse Gas Initiative (RGGI), the Northeast’s first-in-the-nation mandatory cap and trade system. ENE (Environment Northeast) today released an evaluation of RGGI’s design and implementation based on the first year.
“The outlook at the end of RGGI’s Year 1 is very positive, for the participating states and for cap and trade as a climate solution. The Northeast’s model shows that a well designed cap and trade auction system works, and provides a guide for addressing key issues such as controlling consumer costs by investing in energy efficiency, having credible offset requirements and ensuring honest market monitoring,” said Dan Sosland, ENE’s Executive Director. “RGGI’s progress to date outlines a clear strategy that can help bring about a strong, low carbon economy in the Northeast and beyond.”
ENE’s evaluation outlines key features and lessons that can be applied as RGGI and other regional and federal cap and trade programs move forward. The evaluation finds that RGGI is economically efficient and well organized, and its overall success shows that cap and trade can work in the United States.
“In its first year RGGI has shown that a cap and trade system can run smoothly and be structured to benefit consumers,” said Derek Murrow, Energy and Climate Policy Director at ENE. “RGGI has raised almost $500 million to invest in energy efficiency and other programs that will benefit consumers, while scarcely affecting electricity prices in New England.”
Investment in consumer programs is one of RGGI’s most important design features and will be essential to RGGI’s continuing success. Efficiency programs – which are slated to receive two-thirds of proceeds from allowance revenues – hold down electricity consumption and emissions, thus lowering carbon prices and reducing consumer costs. One of the RGGI program’s weaknesses is that efficiency funds are susceptible to being diverted to reduce budget shortfalls, as some states have done or are considering. But the lesson to be learned from RGGI’s first year is that sticking with efficiency commitments benefits states and their constituents economically in the short- and long-terms.
“Efficiency greases the wheels of cap and trade,” said ENE’s Dan Sosland. “To keep RGGI rolling and protect consumers, states must follow through on efficiency funding commitments.”
Another important lesson from RGGI’s first year is that emissions can decline faster than anticipated. RGGI emissions are estimated to have fallen 25-30% below the regional cap in 2009. The decline appears to be caused by electricity producers shifting to cheaper, cleaner sources like natural gas, the economic downturn, and effective efficiency programs. Due to its low price, natural gas is producing an increasing share of the region’s power, with production also increasing from other non-emitting resources, such as wind, hydro, and nuclear power.
“Low emissions levels are a good thing,” said Peter Shattuck, Carbon Markets Policy Analyst at ENE. “RGGI has shown that emissions reductions can be achieved at lower than anticipated costs, and the program’s targets should be adjusted to reflect recent emissions declines.”
Evaluation Grades:
Auctions
Design – Grade (A)
Implementation – Grade (A)
Funding
Design – Grade (A)
Implementation – Grade (B)
Offsets
Design – Grade (A)
Implementation – Grade (Incomplete)
Cap Level
Design – Grade (C)
Implementation – Grade (Incomplete)
Governance
Design – Grade (A)
Implementation – Grade (A)
The RGGI Year 1 Evaluation can be found at: http://www.env-ne.org/resources/open/p/id/1027
Additional ENE background documents on RGGI can be found at: http://www.env-ne.org/projects/open/p/id/331/program/Climate%20Change%20Solutions
The official RGGI Web site is: www.rggi.org
