Environment DEC
From the September 2006 issue
Final Model Rule Announced to Help States Implement RGGI
The model set of regulations to implement the Regional Greenhouse Gas Initiative (RGGI) has been finalized. Now it will be proposed in each participating state, with New York planning to propose a draft regulation this fall. RGGI states also released an amendment to their December 2005 Memorandum of Understanding (MOU).
Fran Litz, (at the microphone) DEC Climate Change Policy Coordinator, gathered input on the model rule from groups throughout the state
How It Works
Under RGGI, seven northeast states agreed to implement a cap-and-trade program to reduce carbon dioxide (CO2) emissions, which are a major contributor to global warming. This will be the first mandatory cap-and-trade program for CO2 emissions in United States history. The states participating in RGGI are: Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont. The State of Maryland recently adopted legislation that requires them to join RGGI by June 2007.
The seven RGGI states will launch a regional cap-and-trade system that uses emissions credits or allowances to limit the total amount of CO2 emissions. Beginning in 2009, emissions of CO2 from power plants in the region would be capped at current levels-approximately 121 million tons annually-with this cap remaining in place until 2015. Then these states would begin reducing emissions incrementally over a four-year period to achieve a 10 percent reduction by 2019. Compared to emissions increases without this program, RGGI will result in an approximately 35 percent reduction by 2020.
Offsets
RGGI allows power plants to use "offsets"to account for up to 3.3 percent of their overall emissions. Offset projects provide generators with additional flexibility to meet their compliance obligations at the lowest cost. A power plant owner/operator will be allowed to select the lowest cost emission reductions and apply them to a portion of the plant's emissions requirement. Examples of offset projects include: natural gas end-use efficiency, landfill gas recovery, reforestation and methane capture from farming facilities.
Under the model regulations and the MOU amendment, offset credits may come from anywhere in the United States, provided that offset projects from outside participating states occur under the regulatory watch of a cooperating agency in that state. States or other U.S. jurisdictions not participating in RGGI will need to enter into a MOU with the RGGI state agencies and agree to take on certain administrative obligations to ensure the credibility of the offset projects.
Bottom Line
Any price changes from this program are expected to be minimal, with estimates projecting that average household bills could increase by approximately $3-$21 annually. However, it also is anticipated that RGGI will generate significant new investments in innovative and cleaner technologies and energy efficiency, which could lower electricity rates.
Participating states will proceed with the required legislative or regulatory approvals to adopt the program. Pending completion of this process, the RGGI program will take effect on January 1, 2009.
