The Regional Greenhouse Gas Initiative

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The Regional Greenhouse Gas Initiative

• A Design that Maximizes Environmental Economic
  Benefits

Derek K. Murrow, Director of Policy
Analysis Massachusetts Restructuring
Roundtable June 16, 2005
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Program Goal

• Reduce global warming pollution putting us on
  the pathway to deep reductions by mid-century
• Maximize economic development
• Drive technical innovation
• Maintain reliability and fuel diversity

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Key Policy Issues

• Cap Level Design
• Allowance Apportionment Allocation
• Support for Energy Efficiency
• Flexibility Mechanisms Offsets

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Cap Level Design
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Allocation of Allowances

• The state regulators are creating a new market
  with new permits or CO2 allowances and they need
  to think carefully about how to distribute the
  allowance value
• Generators build the opportunity cost of
  allowances into their bid prices passing costs
  onto consumers
• Consumer Allocation Keep the total cost of the
  program low by investing in energy efficiency,
  the clean energy technologies of tomorrow (RD),
  or customer rebates
• The states should commit to using the allowance
  value to lower the cost of the program majority
  to efficiency programs in the near term

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A Little Energy Efficiency Goes a Long Way
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Potential to Reduce Demand Growth
Source NEEP, 2004
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How to Realize the Benefits of Efficiency

• Consumer allowances could substantially increase
  funding for EE programs
• Utility regulation and procurement
• Require Portfolio Management (allow efficiency to
  compete directly with supply require investment
  in cost effective efficiency)
• Adopt Energy Efficiency Portfolio Standards
• Launch Decoupling Proceedings
• Codes and standards
• Adopt state appliance standards - as CT, MD, and
  NJ have done
• Improve building energy codes

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Flexibility Mechanisms

• Banking unlimited
• Borrowing none
• Limited Offset Program
• Our focus is on the process and the criteria
• Environmental integrity
• Limited offset quantity most emissions
  reductions from the regulated entities
• Within the RGGI region
• Regional rule and pre-approval body

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Why You Should Support RGGI

• Climate Change The scientific understanding of
  climate change is now sufficiently clear to
  justify nations taking prompt action. It is vital
  that all nations identify cost-effective steps
  that they can take now, to contribute to
  substantial and long-term reduction in net global
  greenhouse gas emissions. (11 National
  Academies, 2005 )
• Catalyst for Federal International Action
  (states lead)
• Position the Region Economically
• Invest in the right energy mix now those
  regions that have low emissions rates will pay
  less for RGGI and a national program
• Continue to develop new clean energy technologies
  
• Increase Efficiency
• Continued use of robust market based systems that
  keep costs low (compliments restructuring and
  completion of market rules)
• Expanded efficiency programs will reduce
  consumers energy bills, contribute to job growth,
  keep our energy at home, and reduce RGGI
  allowance prices

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Contact Information

• Derek K. Murrow
• Director, Policy Analysis
• dmurrow_at_env-ne.org
• Environment Northeast
• 101 Whitney Avenue
• New Haven, CT 06510
• [phone]