, Gloucester, MA

November 25, 2012

Enviros assail state carbon caps

By Matt Murphy
State House News Service

---- — BOSTON — Massachusetts environmental advocates are ridiculing efforts being made to adjust the carbon dioxide emission cap set under the Regional Greenhouse Gas Initiative, calling the scenarios being studied by participating states a “farce” and suggesting the program has not lived up to its mission.

“As an emissions reduction program it is weak. It is mild. We need to speak the truth,” said Seth Kaplan, vice president for policy and climate advocacy at the Conservation Law Foundation. At one point during a briefing given by the regional compact’s consultant last week, Kaplan turned to the board as he was taking his seat and mouthed the word “farce” to the officials from various states visiting Boston for the stakeholder meeting.

The Massachusetts Department of Energy Resources hosted the meeting on behalf of the nine states participating in the Regional Greenhouse Gas Initiative, or RGGI, to review progress being made toward revisions to the carbon cap on emissions for electricity generators in the New England and mid-Atlantic regions.

State officials are seeking to revise the emissions limits under the regional cap-and-trade program. Some program stakeholders say the cap for the first three years of the program was set too high, leading to an oversupply of allowances and driving down the cost and demand for those credits, reducing the incentive for power suppliers to curb emissions.

Chris McCracken, a consultant with ICF Consultants, presented projections through 2020 of emissions reductions and the price impact on carbon allowances that would result from two proposed new caps of 106 million tons of carbon dioxide and 97 million tons per year. It was the seventh such stakeholder meeting as the RGGI states look to adjust the cap for 2014.

Carbon emissions in 2012 are projected to total 91 million tons, down 17 percent from previous projections and 12 million tons from 2011 due in part to natural gas prices and an unseasonably warm winter, according to officials. The cap in 2012 was set at 165 million tons.

McCracken, however, said both models would do little to reduce overall emissions by 2020, with the more aggressive cap projected to keep emissions at roughly 91 million tons.

Berl Hartman, of Environmental Entrepreneurs, said RGGI was supposed to usher in a “clean energy revolution,” but she likened the first three years of the program that started in 2009 to the Articles of Confederation, calling it “a good first step.”

“Ultimately it failed because it was too weak and if we allow a cap to go forward that doesn’t reduce emissions from current levels we’re going to be toast,” Hartman said.

Under any new cap, the total allowable emissions from the 209 large-scale fossil fuel power plants in the region would decrease 2.5 percent a year through 2020. To meet the target goals, generators must either reduce their footprint or purchase “allowances” that are auctioned by states that use the proceeds to invest in clean energy and efficiency projects.

States have collected roughly $1 billion from the sale of carbon allowances, but Massachusetts Department of Environmental Protection Commissioner Ken Kimmell said there is a “large surplus of banked allowances” that must be accounted for when setting new targets.

McCracken said power generators banked credits for 47 million tons of carbon dioxide from 2009 through 2011, and could carry allowances for another 68 million tons into 2013. As a result, RGGI is looking at how to adjust the caps to account for those allowances.

Under both caps being studied, the gap between emissions that would be produced if nothing were done to alter electricity production and the lower caps would be made up largely through the use of allowances, according to McCracken. The lower 97-million-ton cap would encourage slightly greater actual emission reductions.

The lower cap is also projected to drive the cost of allowances from $2.50 to $6.50 by 2020, while the higher cap would only increase the price to about $3. Some advocates questioned why the RGGI states weren’t looking to replicate what is being done in California, where regulators recently set a floor price for carbon allowances at $10.

“No cap should be considered that doesn’t reduce emission below current levels,” said Peter Shattuck, director of market initiatives at Environment Northeast.

Despite a three-year cap of 564 million tons from 2009 through 2011, the regional emissions for the first compliance period totaled roughly 390 million tons, leaving a surplus of credits. Some states earlier this year, including Massachusetts, retired their unsold credits from the first compliance period. Moving forward, officials have put forward plans that would allow up to 10 million allowances to be purchased each year.

Kaplan called RGGI a “good functioning program” in the sense that it is helping to get clean energy projects built, but called it “alarming” that the two scenarios being reviewed would only stabilize emissions.

“We might actually want to study a scenario that actually yields real reductions an actually does something about the problem,” Kaplan said.