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RGGI Update: Regional Cap-and-Trade Program Survives New York Challenge But Faces Others

By: Maggie Macdonald

The Regional Greenhouse Gas Initiative (“RGGI”) – a cap-and-trade program designed to limit power plant emissions in 10 Northeastern states – has been under close scrutiny in recent months as a result of lawsuits in New Jersey and New York, and legislation in New Hampshire.   Each of these developments demonstrates the polarization and controversy that continue to surround greenhouse gas regulation, and RGGI in particular, years after the regional trading program first took effect.

In New York, three members of Americans for Prosperity, a conservative political action group, brought a lawsuit against Governor Cuomo, the New York State Department of Environmental Conservation, and the New York State Energy Research and Development Authority challenging RGGI’s validity on multiple grounds.  In a decision issued last month, the Supreme Court, Albany County dismissed the action, holding that plaintiffs lacked standing to bring the lawsuit because they did not suffer a distinct injury.  It also ruled that plaintiffs’ claims would have been barred (regardless of their lack of standing) based on their failure to bring a timely challenge.  The court agreed with the state defendants’ arguments that businesses have adjusted their practices based on RGGI, numerous programs would lose funding if RGGI were invalidated, and that plaintiffs provided no reason why their action was delayed until 2011, approximately six years after the RGGI program was adopted in New York.

In New Jersey, the Natural Resources Defense Council and Environment New Jersey have filed a lawsuit challenging Governor Christie and the New Jersey Department of Environmental Protection’s (“NJDEP’s”) decision to withdraw New Jersey from RGGI.  The Plaintiffs allege violations of the New Jersey Administrative Procedure Act, claiming that the Governor and NJDEP failed to provide adequate notice of their withdrawal decision or opportunity for public comment.

In New Hampshire, new legislation was enacted which modifies the state’s participation in RGGI.  The bill, which became law without the signature of Democratic Governor John Lynch, was passed in the state’s Republican-controlled legislature after efforts to withdraw the state from RGGI were vetoed by Governor Lynch.  The law provides for rebates to ratepayers and diverts funds from the state Public Utilities Commission’s energy efficiency programs.  In passing this legislation, New Hampshire also broke with seven other RGGI states by prohibiting the retirement of unsold allowances from the first 14 auctions, effectively diluting the value of new credits.  Perhaps most notably, the law allows for New Hampshire to opt out of RGGI if two other states withdraw, or if one state with over 10% of the program’s allowances withdraws.

For more information on RGGI and other climate change initiatives, contact Jeffrey Gracer or Maggie Macdonald.

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