MASSACHUSETTS AND EIGHT OTHER STATES in the Northeast are starting to get serious about using regulation to reduce the amount of carbon dioxide released by the region’s power plants.
The nine-state Regional Greenhouse Gas Initiative on Thursday agreed to set emissions at 91 million tons starting in 2014 and lower the cap 2.5 percent each year through 2020. The starting point for emissions is roughly equal to the amount of carbon dioxide being released by power plants today.
The new cap is an attempt to put some teeth into the Regional Greenhouse Gas Initiative, which has had little impact on power plant emissions since it was launched at the start of 2009. The current cap, for example, is 165 million tons of carbon dioxide, nearly twice the level of actual emissions. The new cap is an attempt to start reining in carbon emissions by power plants.
“With this change, RGGI becomes much more effective in addressing climate change,” said Peter Shattuck, director of market initiatives for Environment Northeast, an environmental advocacy group.
The amount of carbon dioxide emitted by power plants is dictated by the fuel used to produce electricity and the amount of electricity consumed. The Regional Greenhouse Gas Initiative set cap levels for 2009 through 2013 based on energy and electricity consumption projections that turned out to be way off base as natural gas prices fell and electricity consumption leveled off.
Many power plants over the last several years stopped using coal and oil and shifted to cheaper and cleaner natural gas, significantly reducing carbon emissions. The downturn in the economy, as well as energy efficiency and renewable energy programs, also curbed electricity consumption. According to the operator of the regional power grid, electricity consumption in New England fell by 1 percent last year.
The combination of lower electricity consumption and the shift to natural gas made the Regional Greenhouse Gas Initiative and its cap on carbon emissions irrelevant. Power plant operators still had to buy allowances for the carbon dioxide their power plants were emitting, but the market was so out of whack that the price of allowances was incredibly low. In fact, many power plant operators stocked up on the low-cost allowances. (Most states use the proceeds from the sale of allowances to fund energy efficiency programs.)
With Thursday’s announcement, the Regional Greenhouse Gas Initiative is trying to get the regulatory program back on track by bringing the demand for allowances more in line with supply. Officials are also pledging to take steps to reduce the cap even further to suck up the low-cost allowances that power plant operators purchased over the last several years.
Officials at the Regional Greenhouse Gas Initiative are projecting that emission allowances under the new cap will rise in price from $4 in 2014 to $10 by 2020. An allowance allows the owner to emit one ton of carbon dioxide. Power plant operators typically pass the cost of allowances on to customers in the form of higher prices for electricity, yet officials with the Regional Greenhouse Gas Initiative say they expect customer bills to increase only 1 percent.
The Environmental Protection Agency already regulates carbon dioxide emissions of new power plants, and is preparing to issue rules for existing plants. Shattuck said the Regional Greenhouse Gas Initiative could become a template for compliance with the EPA regulations.
The Regional Greenhouse Gas Initiative is made up of the six New England states along with New York, Delaware, and Maryland. New Jersey was a member until 2011 when Gov. Chris Christie pulled out, saying the initiative was an ineffective way of reducing carbon emissions.
Christie’s state was recently devastated by Hurricane Sandy, a storm many environmentalists say was fueled by global warming. Christie said he is focused on rebuilding his state and only later may explore what caused the destruction. “It’s not a main concern for me,” he said of climate change, according to a story in the Bergen Record.