US states participating in RGGI should consider a deeper emission reduction target after 2020 in order to meet their longer-term goals, attendees urged the market’s operators at a stakeholder meeting in Wilmington, Delaware on Tuesday.

RGGI’s regulators are mulling what amendments to make to the market when its fourth trading phase starts in 2018, while seeking input on how the states can use the scheme in the longer-term to meet CO2 reduction targets under the EPA’s Clean Power Plan, which is set to begin regulating the US power sector from 2022.

To prepare for the CPP, RGGI officials said they are examining two potential scenarios.

The first sees RGGI setting a 2030 emissions cap based on the collective CPP targets of all the states, while continuing to provide additional supply via the scheme’s Cost Containment Reserve (CCR), as well as allowing participating utilities to use offsets to cover 8% of their compliance requirements.

The second would eliminate the CCR and offset quotas and set a cap of 76.2 million short tons in 2021, which would fall to 56.7 million tons by 2031.

But with attendees at Tuesday’s meeting hearing that RGGI’s 2020 emissions cap of 78 million tons is more ambitious than the states’ collective 2030 limits under the CPP, and in light of stark warnings from scientists and a climate ‘call to arms’ made at December’s UN talks in Paris, RGGI’s stakeholders want to examine even deeper targets.

“We’d like to see a more ambitious model run with a RGGI cap of 40 million tons by 2030,” said Travis Madsen, programme manager at Environment America, at the meeting.

“Six of the nine RGGI states have signed the Under 2 MOU,” he added, referring to an agreement that commits more than 100 national and sub-national signatories to cut their GHGs by as much as 95% below 1990 levels by 2050.

DANGEROUS LOOPHOLES

Madsen’s call was echoed by other representatives including one from the Sierra Club, who called the CCR and offsets “dangerous loopholes”, and added that the current 2.5% annual reduction rate of RGGI’s emissions cap is not sufficiently ambitious.

“We think RGGI needs 7.5% a year to meet emissions goals,” the official added. “RGGI has achieved reductions of 5% a year since it started.”

But other stakeholders felt that offsets should be retained in RGGI as a cost containment measure rather than redistributing the existing pool of allowances sat in the CCR.

“The CCR allows more CO2 to be emitted, whereas because offsets represent reductions made elsewhere, they are carbon neutral,” one attendee said.

“It’s worth considering giving offsets parity with the CCR,” added a representative of the American Carbon Registry, a US-based carbon credit portal that oversees the registration and verification of voluntary and compliance-grade offsets.

LINKING

RGGI and the other multi-jurisdictional North American emissions trading system the WCI are exploring ways of collaborating and potentially linking their markets, officials from both schemes have said.

Washington State also earlier this month released details of its plan to launch a carbon market to help it halve state GHG emissions from 1990 levels by 2050, and it wants to use RGGI allowances to achieve that.

But some stakeholders at Tuesday’s meeting voiced caution over the issue of linking RGGI to other markets, warning that lower prices elsewhere might encourage participants to import their permits, thereby depriving RGGI states of auction revenues used to fund renewable and energy efficiency measures.

Similarly, linking to a third-party ETS is not simply a matter of sizing up that jurisdiction’s rules, one attendee noted. “You have to consider not only who you are linking to, but who your partner is linked to.”

Such concerns should be reflected in a more rigorous set of criteria for potential partner markets, another attendee told the meeting, adding “you can be ‘trading-ready’ but still require proof that other markets are set up properly.”

RGGI’s operators RGGI, Inc. last month said Washington’s draft proposal would be evaluated, but warned that it raised “substantive issues”.

But Peter Shattuck of the Acadia Center asserted that integration of markets is a key goal.

“Larger markets are more effective,” he said. “That’s been one of the benefits of RGGI and we’d like to see the whole country get there.”

RGGI plans to hold at least two further stakeholder meetings in the spring and summer, before the states move towards finalising their proposals in the fourth quarter.

By Alessandro Vitelli and Mike Szabo – news@carbon-pulse.com