rggi - one approach to carbon management in the power sector€¦ · rggi –one approach to carbon...
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5 October 2017
CLIMATE CHANGE AND THE LAW – Fall 2017
Vermont Law School
RGGI – One Approach to Carbon Management in the Power Sector
David Farnsworth, Esq.
Senior Associate
The Regulatory Assistance Project®
50 State Street, Suite 3
Montpelier, VT
United States
+1 802 498-0708
raponline.org
Regulatory Assistance Project (RAP)®
• Introduction: Cap-and-Trade, the Electric Sector
and our Climate
• RGGI
• Observations and Discussion
2
Outline
Regulatory Assistance Project (RAP)®
Where Does Cap-and-Trade Come From?
• Clean Air Act -- Pre-1990 Amendments
• Non-Attainment Offsets
• Bubbling
3
Cap-and-Trade Introduced
Regulatory Assistance Project (RAP)®
Background• Permits to emit are
allocated.
• Additional permits:
• Can be bought at state-run auctions and are
• Available in the form of offsets.
• Emitters can sell excess
allowances that they don’t
need.
• Over time, the program
(and number of
allowances) becomes
more restrictive, limiting
allowed emissions.
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Cap-and-Trade Introduced
Regulatory Assistance Project (RAP)® 5
To reach carbon reduction goals, e.g.,
80% by 2050, an economy needs to
move away from carbon-intensive
technologies and practices to those
that are cleaner and more efficient.
Carbon Management – It’s About theEconomy
Regulatory Assistance Project (RAP)® 6
I do not mean, “the economy, stupid!" James Carville, Bill Clinton strategist in 1992 presidential bid against George Bush.
Regulatory Assistance Project (RAP)® 7
“Turning the economy around is like turning an aircraft carrier around” - M r. Chapin
Regulatory Assistance Project (RAP)® 8
But Big Ships Have Grown More Maneuverable: Bow-Thruster
Regulatory Assistance Project (RAP)® 9
Regulatory Assistance Project (RAP)® 10
Can cap-and-trade policy help maneuver the economy like a bow-thruster moves a ship?
Regulatory Assistance Project (RAP)® 11
US Federal Carbon Program
• US Environmental Protection Agency’s (EPA)
Clean Power Plan withdrawn by Trump
Administration April 28, 2017
• Clean Air Act – Federalism
Regulatory Assistance Project (RAP)®
• It is changing:
• Data
• Renewables
• Electrification
• Storage
• There are beginning to be alternatives to “plain old”
electric power
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The Power Sector—a Couple Thoughts
Regulatory Assistance Project (RAP)®
• It is changing:
• How fast?
• Global warming potential of our energy use:
• Example: natural gas (methane, actually)
• 33 X CO2 (100 year)
• 86 X CO2 (20 year)
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The Climate—a Couple Thoughts
Regulatory Assistance Project (RAP)® 14
RGGI
Regulatory Assistance Project (RAP)®
We did it with SO2
Let’s do it with CO2
15
Once Upon a Time (2003), Someone Wanted to Run for President
Regulatory Assistance Project (RAP)®
• Nine separate state programs
that look alike and coordinate:
• Emissions cap is made of
emissions from all 9 states
• Cap largely based on
historical emissions
• Fossil-fired electric generating
units ≥25MW
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RGGI
Regulatory Assistance Project (RAP)® 17
• Start date of January 1,
2009
• 3-year compliance
periods
• Program Reviews
• 2012
• 2017
RGGI
Regulatory Assistance Project (RAP)® 18
RGGI States: Pollution Reductions with Economic Growth
Regulatory Assistance Project (RAP)®
• Quarterly regional CO2 allowance auctions
• CO2 allowances are issued by each state
• Compliance occurs at the state level
• One tradable CO2 allowance market - CO2 allowances are fungible
across the multi-state region
• CO2 allowances issued by any participating state can be used for
compliance in any of the participating states
• Auction proceeds invested by the states (more below)
• Centralized allowance tracking and emissions tracking
— Market monitoring of CO2 allowance market
— Limited use (3.3%) of offsets
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RGGI Mechanics in Brief
Regulatory Assistance Project (RAP)®
• CO2 allowance auctions are open to all
prequalified bidders
• 36 quarterly auctions held since September 2008
• Auction #36, June, 2017
• $37 million raised
• CO2 allowance auction clearing prices have
ranged from $1.86 to $7.50
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RGGI’s Market Based System
Regulatory Assistance Project (RAP)® 21
RGGI Auction Clearing Prices Summary
Regulatory Assistance Project (RAP)® 22
• RGGI states have distributed
approximately 90% of
allowances by auction
• More than $2.58 billion in auction
proceeds through 33 auctions
• Invested $1.37 billion of auction
proceeds in range of energy
efficiency, clean and renewable
energy, direct bill assistance,
GHG abatement programs
RGGI Reinvests in the Energy Sector
RGGI Investments by Category: 2008 – 2014
Source: RGGI 2014 Proceeds Report
Regulatory Assistance Project (RAP)® 23
• In 2015, over $410 million in
RGGI proceeds invested in
programs including energy
efficiency, clean and renewable
energy, greenhouse gas
abatement, and direct bill
assistance.
• 64 percent – energy efficiency,
• 16 percent clean and
renewable energy.
RGGI 2015 Investments
• Over the lifetime of the projects,
2015 investments are projected
to produce:
• $2.31 billion in energy bill savings;
• 9 million avoided MWh of electricity; and
• 28 million avoided MMBtu of fossil fuel.
See Investment of RGGI Proceeds
in 2015.
Regulatory Assistance Project (RAP)® 24
Public Policy Observations
Regulatory Assistance Project (RAP)® 25
Cost of Primary Energy Resources2015 Lazard Analysis
Regulatory Assistance Project (RAP)® 26
Efficiency is low-cost “carbon scrubber”
Regulatory Assistance Project (RAP)®
• One of RGGI’s most important design decisions
was to auction allowances (rather than give them
away for free) and
• To invest auction proceeds in energy efficiency
and other clean energy programs
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The Role of Revenue Recycling
Regulatory Assistance Project (RAP)®
• RGGI auctions raised nearly $1B in its first 3 years
• States invest in existing clean energy and other
programs:
• 1st Compliance Period -- Net benefits: $1.6B
• 2nd Compliance Period -- Net benefits: $1.3B
28
The Role of Revenue Recycling
Regulatory Assistance Project (RAP)®
• Today, ≥60% of RGGI auction revenue dedicated
to EE programs:
• Saving consumers money
• Reducing emissions
• Delivering economic benefits 29
Cap-and-Invest: Role of Revenue Recycling
Regulatory Assistance Project (RAP)® 30
Reductions come, less
from the program’s price
on carbon, and more
from investing the
program proceeds
Cap-and-Invest Program
Regulatory Assistance Project (RAP)® 31
Reductions come, less
from the program’s price
on carbon, and more
from investing the
program proceeds
Cap-and-Invest Program
Regulatory Assistance Project (RAP)® 32
Observations and Discussion
Regulatory Assistance Project (RAP)®
• Cap-and-trade can support:
• Auctioning
• Investment
33
Some Observations
• Cap-and-trade can be
coordinated with clean
energy policies
• Energy Efficiency
• Renewable Energy
• Demand Response
• Transportation
Regulatory Assistance Project (RAP)®
• Cap-and-trade must be integrated into a larger
carbon strategy – remember the complementary
policies (EE, RE, Electrification)
• Coordination is important
• How should the program work with other state air
pollution and clean energy policies?
• Is a ton a ton?
• Integrated Resource Planning IRP tells us to ask: “Are we
getting the cheapest tons first?
• Why pay more than you have to?
34
Some More Observations
Regulatory Assistance Project (RAP)®
• Is an economy, in fact, like a big unwieldy ship,
hard to turn and maneuver?
35
• Can a policy like cap-and trade work like a bow
thruster, maneuvering it in the direction we want?
Regulatory Assistance Project (RAP)® 36
Thank You
Questions
Regulatory Assistance Project (RAP)®
Carbon Caps and Efficiency Resources: How Climate Legislation Can Mobilize
Efficiency and Lower the Cost of Greenhouse Gas Emission Reduction, R. Cowart
(Vermont Law Review 2008 )
Climate Issue Brief #4, State Clean Energy Policies: The Foundation for an Electric
Sector Cap-and-Trade Program, National Association of Regulatory Utility Commissioners
Quantifying the Air Quality Impacts of Energy Efficiency Policies and Programs, J.
Shenot (RAP)
Images and How We Remember History, D. Farnsworth
Climate Policy and Affordability: Advocacy Opportunities in the Northeast, Farnsworth,
D’Antonio , and Pike-Biegunska
Carbon Trading in China: Progress and Challenges, P. Parenteau and M. Cao, Mar. 2016
The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast
and Mid-Atlantic States Review of the Use of RGGI Auction Proceeds from the First
Three-Year Compliance Period, Hibbard et al, Nov. 5, 2011
37
Resources
About RAPThe Regulatory Assistance Project (RAP)® is an
independent, non-partisan, non-governmental
organization dedicated to accelerating the transition
to a clean, reliable, and efficient energy future.
Learn more about our work at raponline.org
David Farnsworth, Esq.
Senior Associate
The Regulatory Assistance Project®
+1 802 498-0708
raponline.org
50 State Street, Suite 3
Montpelier, VT
United States