RGGI turns ten years old this month. RGGI—that’s the Regional Greenhouse Gas Initiative—was conceived as an agreement between seven northeast states, including New Hampshire, to reduce greenhouse gas emissions created by the production of electricity.
David, I say it was ten years this month, though that anniversary it is a little squishy.
It is squishy because it took several years to get [RGGI] going. I kind of chose this because ten years ago this month there was a memorandum of understanding signed by seven governors that got it officially going, but you could argue that the tenth anniversary was a couple of years ago, or that it isn’t for another year or so.
And no birthday cake for RGGI in New Jersey because that state dropped out.
They’re trying to drop out. There’s actually a lawsuit.
Anyway, before we get into the question of how successful or unsuccessful RGGI has been, let me ask you: how was it supposed to work?
RGGI was set up as a market-based way to get electricity produced with less greenhouse gases being emitted by the power plants. One way to do that is to have the government say, “You, power plant, can only emit so much.” RGGI tried to get a bunch of states together—a bunch of different power plants, sharing the same grid—and say, “Here’s the total amount of greenhouse gases that can be produced. You have to pay if you want to pollute, so what you can do is, we’ll hold an auction, and you can bid and decide how much you want to pay underneath this cap. So you can actually trade—buy and trade. If you have a really polluting power plant, it’ll cost you money. If you manage to build a power plant that isn’t polluting at all, you won’t have to buy as much, so you’ll save money.” That’s the market part of it.
The idea is that the owners of these power plants can figure out the details of how to do it amongst themselves with money as the incentive, which it so often is in our world.
So it’s essentially incentivizing the production of cleaner power or at least reducing the production of dirty power.
Less dirty power. It’s establishing the “invisible hand” that we like to talk about in rather arbitrary parameters.
Let’s talk about whether it actually reduced greenhouse gases. Did it?
Well, greenhouse gases have gone down quite a lot in RGGI states. It’s hard to measure because states have joined and New Jersey is trying to drop out. It’s even harder to measure because of so many other factors. The point of my column was that it’s hard to say. As we all know, natural gas has become the fuel of choice for electricity production in the northeast, and when it replaces coal, that drops the greenhouse gases. Of course, the recession came along, and that dropped greenhouse gases, because lots of industries stopped generating it. And industry has changed in general. So even though the greenhouse gases have dropped by almost half, it’s hard to say how much of that is due to RGGI.
And because it’s so hard to figure out how much is due to RGGI, does it stand to reason that there are conflicting opinions on whether or not the program as a whole is successful?
I think “conflicting opinions” is a mild way to put it, a calm, NHPR way to say it. Yes, many people view it as an unnecessary expense, shoving costs onto the rate payer without a good reason. And just as with the effect on greenhouse gases, it’s hard to really quantify the effect on costs. There’s a lot of money that’s been paid by the utilities for the right to pollute, and it has to come from somewhere. It probably comes from us, the rate-payers. So there’s a cost, but there’s a question about whether the savings caused by RGGI—particularly the way it has pushed energy efficiency, which reduces the total amount of electricity that we need in order to do our daily business—whether that savings has counterbalanced the extra costs. It’s very hard to parse it down.
What you can basically say about RGGI is that it has not failed spectacularly. It has not driven utilities out of business. It has not tripled our rates. It hasn’t led to brownouts. It hasn’t succeeded spectacularly. It has, somehow, made some magic green utopia in the northeast in which we’re producing electricity and yet all the flowers are blooming. So I think you can call it—and I think most people would call it—a success, because it has shown that it is possible to craft a market-based approach to this complicated issue of keeping the lights on while reducing the amount of greenhouse gases you produce.
There are attempts to expand it. There’s desire to push it. The question is whether it scales up. California has started something similar. Some people would like to see it nationally. Some others think it would be a disaster. But RGGI is a model for innovative ways to try and tackle this difficult problem.