Growing the Region’s Cap-and-Trade Markets: the Clean Power Plan and RGGI

Sanjay Seth

Could New Jersey end up re-joining the Northeast’s cap-and-trade program for carbon emissions after all?

Last month, the New Jersey Assembly joined the Senate to vote to override regulations that governed New Jersey’s participation in the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade program focused on major power plants that includes nine states throughout the Northeast. (Pennsylvania and several Canadian provinces participate as observers.)

By voting to override those regulations, New Jersey legislators set in motion a process to potentially introduce legislation to rejoin the cap-and-trade program. However, with Christie’s veto assured, the outcome of such legislation is uncertain at best.

Nonetheless, the push for New Jersey to rejoin RGGI is gaining momentum. Last week, the Obama administration’s Clean Power Plan (CPP), which regulates greenhouse gas emissions from power plants, passed a significant legal hurdle. The U.S. Court of Appeals for the District of Columbia Circuit denied a request from various coalitions of states and industry representatives, including New Jersey, for a stay pending court review of the CPP.

It is clear that if New Jersey were to rejoin RGGI, it would more-or-less guarantee that the state could meet its emissions targets under the Clean Power Plan – while also gaining the benefits of participating in a regional cap-and-trade system. (A recent Acadia Center study concluded that the reinvestment of RGGI revenues in clean energy from 2009 to 2014 will generate “over $2.76 billion in net economic gains and 28,500 job-years of employment” within the Northeast.) Moreover, by design, the CPP contains incentives for New Jersey and Pennsylvania to join RGGI by participating in regional efforts climate action.

Like RGGI, the CPP represents a muscular effort to rein in the emissions of greenhouse gases and other pollutants from power plants throughout the United States. However, unlike RGGI, the CPP is not voluntary. With federally set targets for emissions reductions customized for each state’s energy context, the plan seeks to achieve a 32% reduction in greenhouse gas emissions from power plants (relative to 2005 levels) over the next fifteen years.

Without the CPP, the United States would likely face even more significant headwinds in meeting the emissions reduction commitments made last month under the historic Paris climate accord. Through 2020, which is the year when global leaders will meet again to discuss progress made toward the targets of the Paris accord, RGGI plans to use the price of carbon emissions to ratchet down overall emissions significantly in the interim, allowing for significant climate action at a sub-national scale.

With an assist from RGGI, the Northeast has a relatively straightforward and proven roadmap for compliance with the CPP and the goals of mitigating climate change. The court’s unwillingness to put a hold on the implementation of the CPP maintains pressure on states and politicians throughout the Northeast to stay the course on efforts like RGGI and meet their emissions targets head on.

This chart shows state-level carbon emissions from 2000 to 2013 for states throughout the Northeast and Mid-Atlantic. All states listed in this chart, except New Jersey and Pennsylvania, are full members of RGGI. States that have made the greatest strides toward reducing carbon emissions from energy generated within the state are listed toward the top. Those states that have made the least progress, toward the bottom. It’s important to note that RGGI does include states, like Rhode Island (3 trillion Btu) and Delaware (4 trillion Btu), that do not produce significant amounts of energy, compared to states like Connecticut (207 trillion Btu) and New York (873 trillion Btu).

What this chart shows is that, while RGGI has grown to include more than nine states, two of the region’s three largest polluters are not committed to RGGI. The total energy production of Pennsylvania alone (5,880 trillion Btu), which generates around forty percent of that energy from coal and is a major energy exporter, is more than three times that of all the RGGI states combined.

Our region still has the opportunity to expand the impact of RGGI, meet our obligations under the CPP, reduce the impact of power generation on global warming, and create a model for regional action that can accelerate the creation of similar efforts nationally and internationally. However, efforts like RGGI require clear and committed leadership. Governor Christie of New Jersey continues to oppose both RGGI and the CPP, while Governor Wolf of Pennsylvania has become more quiet about RGGI recently, following a 2014 campaign where he said he would bring Pennsylvania into RGGI.

Though the CPP and other efforts will continue to face challenges, the Northeast has a model worth building upon in RGGI to meet the emissions targets of the CPP, while also spurring investment in clean energy that secures billions in net economic gains and thousands of jobs.