First U.S. Cap-and-Trade Initiative Under Threat?

Most folks in the U.S. probably don't even realize that the Northeast and Mid-Atlantic U.S. have a cap-and-trade initiative in place, the Regional Greenhouse Gas Initiative or RGGI (pronounced Reggie). Ten states participate in this initiative -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont —and in approximately two years, they have brought in more than $729 million in revenue while reducing greenhouse gas emissions.

While RGGI has been working excellently, just as planned, with little cost to taxpayers (a $0.72 increase to the monthly electricity bills of New Yorkers, for example), it is facing a couple of challenges now:

1. Some Tea Partiers and the organization Americans for Prosperity are taking aim at the initiative, trying to take it down in New Jersey and New York. One basic argument they are putting forward is that because our dysfunctional U.S. Senate couldn't pass cap-and-trade legislation, this successful, effective, regional cap-and-trade system that has been in place for over two years isn't needed. How that makes sense, I'm not sure. Furthermore, they are concerned it could encourage cap-and-trade systems in other regions of the country as well. Oh my!
2. As more of an internal threat or problem, a few states have started to use some of their revenue from this initiative to cover general state budget issues (including New Jersey and New York), while they previously committed to spending such revenues on renewable energy and energy efficiency programs that would create jobs and lower electric bills.

Tackling the first issue first, it seems a little unlikely that states would pull the plug on a successful, functioning system like RGGI...but then again, who would have guessed that one of the two major political parties in the U.S. would be the only political party in the world to reject clear climate science?

But even if Tea Partiers and some other off-the-wall politicians really put in the effort to pull the plug on the system in their states, Leigh Raymond, the associate director of the Climate Change Research Center at Purdue University, notes that given the fiscal situation of these states, it would be like shooting themselves in the foot for other political leaders to follow them. “The states are so broke that it’s going to be unbelievably difficult for them to stop this program,” Raymond says. “They’re desperate for money.”

That final statement leads us into the second issue, though, how RGGI revenue should be used.

The agreement the states signed onto actually only binds them to spending 25 percent or more of RGGI revenue on direct consumer benefits or “strategic” energy purposes. And, as a whole, they are currently putting 80% of proceeds into such purposes.

But New Jersey is using all of its revenue for other purposes far less than the average 80 percent, investing only $26.5 million in energy efficiency projects of the $83 million it has earned so far. Similarly,  New York sent $90 million to its general fund last year (more than 25% of the 265 million it has generated so far). The understanding was that these states would be putting all of this cap-and-trade revenue into these programs, as doing so would create jobs and most benefit the evolution and efficiency of our energy systems, driving long-term energy and environmental costs down.

New Jersey and New York need to get back to the intent of the initiative ASAP. As some policy experts and lawmakers have pointed out, using the revenue for more general purposes is "short sighted" and sets a "horrible precedent."

Action steps for you? Sign the petition below encouraging New Jersey state officials to make sure RGGI stays in place and telling them to use RGGI revenue in the way it was intended to be used.

This article has been corrected to reflect the fact that New Jersey has invested $26.5 million in energy efficiency projects. It has not diverted all RGGI money into its general fund as was previously stated.

Photo Credit: Rafakoy via flickr (CC license)

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