As emissions drop, Northeast tightens its cap-and-trade system
By Philip Bump
Congratulations to the Regional Greenhouse Gas Initiative (RGGI, pronounced “Reggie,” like Archie Andrews’ obnoxious friend) on effectively reducing carbon pollution! Kind of!RGGI, long-time readers may recall, is a marketplace for carbon emissions in the Northeast. It’s cap-and-trade, explained more fully here. A price is determined for a set amount of carbon allowances and fossil-fuel power plants buy those allowances. Because of a big drop in emissions from participating states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont – the total amount of allowed emissions will be reduced next year.
From The New York Times:
The regional group proposed a 45 percent reduction next year in the total carbon dioxide emissions allowed. …
The reduction from 165 million tons is expected to raise the price of compliance, and further reductions of 2.5 percent annually were likely to increase the value of the allowances that utilities must submit for every ton of carbon dioxide, or its equivalent, that they emit.
If the proposal goes into effect, the analysis done by the group, which is a collaboration of nine states to cut carbon emissions, indicates that by 2020, allowances that are now trading at $1.93 could trade as high as $10. That would be roughly at the level where allowances for California’s new economy-wide cap-and-trade system were auctioned last fall.
Carbon dioxide emissions in participating states have been dropping, but not so much because of RGGI. Rather, it’s for the same reason they’re dropping everywhere in the U.S.: transition from coal to natural gas and increased use of renewables.
Cap-and-trade is all about supply and demand. If RGGI allows far more pollution credits than are needed, prices for those credits plummet and polluters don’t need to worry about emissions. Reducing the number of credits constrains pollution.
But, of course, conservatives are complaining. From the Union-Leader:
“It’s time to remove our state from this failed cap-and-trade program and take away this burden from New Hampshire individuals and small businesses,” said Corey R. Lewandowski, state director of Americans for Prosperity-New Hampshire, in a statement.
“Today’s proposal to significantly reduce the number of permits available demonstrates the failure of the RGGI program.”
And that statement demonstrates the failure of Americans for Prosperity — a group with deep ties to the fossil-fuel-loving Koch brothers — to have any understanding of basic economics. In the Archie universe, AFP would be Moose.
Philip Bump writes about the news for Gristmill. He also uses Twitter a whole lot.