Editorial

The Failure of RGGI

RGGI proponents want us to believe that the program is delivering on a global environmental promise, but the reality is the nine-state cap and trade system is a colossal failure of resource allocation that should be repealed to leave more efficient market forces.

The Regional Greenhouse Gas Initiative (‘RGGI’) is the darling of regulators in the nine participating states that include New England, New York, Delaware and Maryland. RGGI boosters insist the carbon cap-and-trade program is responsible for precipitous declines in carbon emissions, saving consumers hundreds of millions in energy costs, creating thousands of new jobs and improving public health.

The problem for the boosters is that RGGI’s own numbers do not support their glowing claims.

Citing from the September 2016 report by RGGI.org, (“The Investment of RGGI Proceeds through 2014”), fossil plant owners in the RGGI states, or more exactly, consumers of their energy, forked over $1.79 billion[1] to their state governments in the period from 2008 to 2014 to be spent on programs meant to reduce carbon emissions.

Of these funds, the states seized $93.1 million to meet budget shortfalls, allocated $329.4 for future programs and ‘invested’ the remaining $1.37 billion in projects that by 2014 reportedly trained 7,200 workers[2] and reduced carbon emissions by 1.7 million tons with an expected lifetime carbon avoidance of 15.4 million tons.

Impressed? Don’t be!

In the same period (2008–2014) the free market reduced electric sector carbon emissions in the RGGI states by 43.1 million tons – 25 times more than RGGI’s claim – and at no cost to ratepayers! [3]

But it doesn’t end there.

Since 2008, the clearing price for RGGI allowances has averaged $3.31 per ton. At their highest, the allowances reached $7.50 in December 2015 before tumbling to $2.53 per ton today. But this fact has repeatedly been lost on state regulators who approved spending $1.37 billion to lower emissions by just 15.4 million tons which equates to $89 per ton! In short, RGGI sold allowances for well under $10/ton and then RGGI states built offset projects costing $89/ton. On specific projects, the cost per allowance was often much higher.[4]

RGGI proponents want us to believe that the program is delivering on a global environmental promise, but the reality is the nine-state cap-and-trade system is a colossal failure of resource allocation that should be repealed to leave more efficient market forces.

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[1] In the ensuing years since 2014, RGGI has drained another $1billion from the participating states.

[2] RGGI does not cite the number of jobs created. Workers trained represents the total number of “training seats filled directly by the program from inception through to 2014” without double counting workers who might have attended more than one training course.

[3] U.S. EIA 1980-2014: EIA numbers are converted to short tons using (1.10231 short tons/metric ton) in order to be consistent with RGGI reporting.

[4] The $1.5 million price tag for Sofia’s Plaza in Connecticut to install a 0.5 MW solar PV system (rooftop and ground-based) was funded 100% through RGGI auction proceeds. According to RGGI, the project is expected to annually save 475.2 MWh and avoid 275 carbon tons (5,500 short tons saved over 20 years) - page 16-17. Based on these figures, the cost per carbon ton over 20 years is $273.

 

JUL 31 2017
http://www.windaction.org/posts/47017-the-failure-of-rggi
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