Every day there is increasing evidence that we need to accelerate our nation’s transition to a cleaner energy infrastructure. The American Climate Prospectus released by the Risky Business Project states that a “business-as-usual” approach to energy use creates serious economic risks. The U.S. Environmental Protection Agency (EPA) recently proposed a new rule requiring states to reduce carbon pollution from the nation’s existing power plants. The Obama Administration has issued its Fifth National Climate Assessment, asserting that climate change and its effects are present today, not some time off in the distant future.
Whether we are ready or not, we are faced with circumstances that require action. Fortunately, we have powerful tools at our disposal to take that action—tools that industry and state governments can use together to reduce carbon pollution and hasten our transition to a cleaner energy infrastructure, at the lowest possible cost.
Several proven cost-effective tools for accelerating this transition are already in practice. Renewable portfolio standards, energy efficiency policies, green banks, building codes and standards—these and other programs have demonstrated that we can develop our clean energy infrastructure without detriment to grid reliability or the economy.
Case in Point: RGGI
One program that has proven to be particularly effective is the Regional Greenhouse Gas Initiative (RGGI). Developed through a collaborative multi-state and multi-disciplinary process, and enacted with bipartisan support, RGGI is a field-tested, proven model for cost-effectively reducing carbon pollution while generating economic benefits.
RGGI proves—and not for the first time—that regional, market-based pollution reduction programs work. One of the first regional pollution reduction programs, the EPA Acid Rain Program, served as a prototype for the RGGI program. The Acid Rain Program realized its goal of reducing sulfur dioxide and nitrogen oxide pollution at one-quarter of the original estimated cost. The success of this regional pollution reduction program has been replicated in RGGI. Since 2005, the RGGI region has seen a 40% drop in power sector carbon emissions, even as its regional economy has grown by 7%. In fact, the RGGI state environmental and economic regulators decided to strengthen RGGI in 2014 by locking in those reductions and moving forward with changes that will help further reduce the region’s projected power sector carbon pollution in 2020 to levels almost half that of 2005. These changes are also projected to add more than $8 billion to our economy.
RGGI and other regional market-based programs are designed to be cost-effective. RGGI’s regional market-based approach relies directly on market forces to encourage states and the power sector to find the least expensive pollution reduction opportunities. This approach takes advantage of the regional nature of the electricity grid and complementary individual state energy policies, while also channeling capital to strategic energy initiatives. These initiatives can include technology upgrades at the plant itself, new renewable energy facilities, energy efficiency projects that reduce energy demand, or even direct consumer bill assistance. Allowing carbon pollution reduction strategies to be tailored to each state’s unique circumstances results in a more diverse (and effective) set of projects, which directly benefit the individual objectives of each state and maximize the value of investment for the region.
RGGI’s market-based approach has also yielded positive economic benefits for the region. The RGGI states distribute most of the allowances that provide the power sector with the right to emit carbon dioxide via auction. These auctions generate revenues that are reinvested into energy efficiency, renewable energy, and other clean energy infrastructure programs. These programs help create local jobs and grow the region’s economy while helping businesses and families save money on their energy bills, reducing overall demand for electricity, and reducing the need to import fossil fuels into the region.
An independent report by The Analysis Group found that, through the end of the decade, RGGI proceed investments generate $1.6 billion in net economic benefits, put $1.3 billion in energy bill savings back into the pockets of consumers, and create 16,000 job-years in the region. By using funds from the program to invest in clean energy infrastructure, RGGI has demonstrated that regional market-based programs not only reduce carbon pollution, but they also can generate significant economic benefits.
The Value of Collaboration
Regional market-based programs like RGGI provide a proven model to cost-effectively reduce carbon pollution while maintaining grid reliability and growing our economy. But perhaps as importantly, they show how important it is to collaborate across regions and across professional disciplines as we work to build this new infrastructure.
RGGI was launched thanks to a 2003 letter sent by then–New York Governor George Pataki to other governors in the region, both Republicans and Democrats. The RGGI states are diverse, with different energy demands, natural resources, power profiles, regional transmission organizations, and economies. Yet the states have been able to work together to implement RGGI successfully. It has not always been easy, but this collaboration has resulted in a program that is cited by power plant owners and environmental nonprofits alike as a national model.
What our experience demonstrates is that we can reduce carbon pollution without detriment to grid reliability or the economy and ultimately deliver a cleaner energy infrastructure. But we can’t do it alone. We have to do it together. ■
— Kelly Speakes-Backman is commissioner of the Maryland Public Service Commission and chair of the RGGI Inc. Board of Directors.