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RGGI’s Uncertain Future

By: Jonathan Kalmuss-Katz

Over the course of three auctions since last September, the Regional Greenhouse Gas Initiative (RGGI) – a cap-and-trade program limiting power plant emissions in 10 Northeastern states – has already raised more than $262 million.  RGGI was designed to be an incubator for national cap-and-trade legislation, and for the most part it has been successful in that role.  That success, however, has also left RGGI’s future uncertain.

On May 15, New York officials filed a brief in state court defending the global warming initiative against a challenge brought by Indeck Energy Services, an Illinois-based company with five power plants in New York.  The following week, the House of Representatives Energy and Commerce Committee passed federal climate legislation that would preempt state carbon trading efforts, including RGGI, between 2012 and 2017 – the first five years of the bill’s national cap-and-trade program.

While the House climate bill (summary available from the link below), introduced by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), would allow RGGI states to revive their program after 2017, reaction from affected state officials has been mixed.  Ian Bowles, Massachusetts Secretary of Energy and Environmental Affairs, has previously supported the Waxman-Markey approach, while W. Michael Sullivan, director of Rhode Island’s Department of Environmental Management, expressed concerns about the lost revenue stream due to the federal preemption.

The leading climate bill in the last Congress, which was filibustered in the Senate last June, did not preempt state climate efforts, instead providing free emissions allowances to states that voluntarily deferred to the federal program.  While the Waxman-Markey bill does not offer RGGI states additional allowances, it would allow regulated facilities that have already purchased credits under RGGI or other state programs to exchange them for federal credits “sufficient to compensate for the cost of obtaining and holding such state allowances,” an amount determined by the average auction price in the year in which the allowance was issued.

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