In a landmark move to build a clean energy economy and cut global warming pollution, Northeastern states yesterday kicked off an emissions trading market to promote efficiency and cut pollution from power plants.
The Regional Greenhouse Gas Initiative (RGGI) is designed to reduce carbon dioxide pollution to a level 10% below current emissions by 2019, while rewarding companies that outperform new pollution limits and lowering energy costs for consumers.
The RGGI program is noteworthy because it is the first mandatory cap-and-trade program in the U.S., but also because it is the first program to auction the pollution permits, rather than give them to polluters for free based on their past emissions, as has been done in other programs.
All of the states participating in the program have committed to auctioning all or most of their pollution allowances. The states intend to use the revenues from the auction of pollution permits for measures that will lower the cost of the program, such as helping citizens and businesses save energy and promoting renewable energy.
"Today is a bold step forward for our clean energy future and the fight against global warming. The new system is good for consumers, good for the economy and good for our climate," said Dale Bryk, senior attorney at the Natural Resources Defense Council (NRDC). "This new energy plan is straight-forward, highly cost-effective and creates a clean energy pathway for the rest of the country to follow. It is the shape of things to come."
Six of the 10 states participating in the new system held their
first allowances auction yesterday–Connecticut, Maine, Maryland,
Massachusetts, Rhode Island and Vermont. The remaining participating
states will hold their first auction in December–Delaware New
Hampshire, New Jersey, New York.
Yesterday’s auction will be
the first of 14 auctions that will take place before the end of the
first three-year compliance period. Auctions will continue on a
quarterly basis thereafter.
Power plants in all participating states will be fully operating under the new system by 2009. Participation in RGGI may give companies in the Northeast a competitive edge as the federal government pollution limits take shape. Although the Bush administration has steadfastly rejected concrete cuts in emissions, there is pressure in both parties to adopt national legislation to curb global warming pollution.
"RGGI provides a competitive advantage to Northeastern companies," said Luis Martinez, attorney with NRDC’s energy program. "These companies are leapfrogging competition both at home and abroad by getting more productivity out of less energy. It’s smart business, and they will reap the rewards as will consumers in the region."
RGGI is expected to lower utility bills by helping consumers and businesses use energy more efficiently. In fact, an analysis commissioned by the RGGI states concluded that the state climate accord would save typical residential customers over $100 per year on their energy bills.
RGGI sets an example for the federal government to establish an energy efficiency plan for the entire country, and similar multi-state climate pacts are in development among western states and Midwestern states. California is on the cusp of creating an economy-wide pollution reduction plan.
The cap-and-trade system is similar to the highly successful program introduced by President George H.W. Bush in the early 1990s to address the acid rain problem. That program has achieved better results at a much lower cost than even optimists estimated at the time of its launch.
The RGGI would also allow states outside of the region to participate, and might eventually be extended to cover not just power plants but all stationary global warming pollution sources, as well as additional global warming pollution, such as methane and sulfur dioxide.
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