Dr' Kathleen P' Bell

1
An Introduction to the Regional Greenhouse Gas
Initiative (RGGI)

• Dr. Kathleen P. Bell
• Department of Resource
• Economics and Policy
• University of Maine
• Orono, ME 04469

source http//www.rggi.org/
2
A Primer for Maine Regional Greenhouse Gas
Initiative
Muskie School of Public Service University of
Southern Maine Margaret Chase Smith Policy Center
University of Maine Sondra Bogdonoff Jonathan
Rubin
3
Background

• Goal
• reduce carbon dioxide (CO2) emissions from power
  plants
• flexibility
• energy affordability
• diversity of individual states' policies and
  programs
• interstate trading
• expandable
• supportive of other trading programs
• impetus for a national plan

4
RGGI

• Regional, collaborative process
• interstate working group
• stakeholders
• public input
• Memorandum of Understanding
• plan for a regional cap and trade system

5
Regional Cap and Trade System

• Region
• ME, NH, VT, CT, NJ, NY, DE, MD, MA, RI

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Regional Cap and Trade System

• Cap
• Who is affected ?
• Regulated Power Plants - all fossil fuel-fired
  electrical generating plants with a rated
  capacity equal to or greater than 25 megawatts
• How are they affected?
• Total CO2 emissions from these plants may not
  increase from 2009 to 2014 and thereafter must
  fall by 2.5 percent per year through 2018
• How will it be implemented?
• MOU designates budgeted allowances by state and
  each state issues allowances in correspondence
  with cap

7
Regional Cap and Trade System

• Trading
• commodity
• allowances
• 1 ton of CO2 emissions per allowance
• market

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Regulated plant's perspective

• Given the choice to select a level of emissions,
  though must have allowances to cover these
  emissions
• RGGI provides flexibility
• RGGI rewards innovation
• RGGI promotes cost-effective reductions

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Allowances

• Allowances
• Offset allowances
• alternative means of reducing greenhouse gas
  emissions (other than cutting CO2 emissions at
  regulated plants)
• offsets must meet strict criteria
• plants can cover up to 3.3 percent of their total
  emissions by buying offset allowances

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Examples of Offsets

• Capturing methane gas
• Capturing and recycling sulfur hexafluoride
• Planting trees
• Improving efficiency of non-power generation uses
  of natural gas and heating oil
• Reducing methane emissions from natural gas
  transmission and distribution

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Key Issues for Maine

• Allocation of allowances
• Public benefits from allowance sales
• Process
• details of implementation
• role of DEP and legislature

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Allowances

• Basis of allowance allocation
• Historic emissions (grandfathered)
• Technology based (benchmarked)
• Output based (market share)
• Distribution of allowances
• Sold
• Auctioned
• Given away
• Planning for new, future generators

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Public Benefits From Sales

• Each state must sell at least 25 percent of its
  allowances
• How should the revenues be used?
• Efficiency improvements to offset rate impacts
• Rate reductions for the neediest
• How much revenue, if any, should be generated
  beyond the required 25 percent?

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Other issues

• Impacts on electric rates
• modest predicted impacts
• Safety-valve
• high allowance prices (7 or 10 per ton) trigger
  greater flexibility in terms of use of offsets
  and timing of compliance
• Leakage
• power sold to RGGI states from outside the region