The Regional Greenhouse Gas Initiative, the first US carbon market, will be recognised as a means of complying with new federal rules forcing utilities to slash their GHGs, but its regulators need to make a few tweaks during their program review next year to ensure the north-east regional scheme is fit for purpose.
That’s according to the Boston-headquartered Acadia Center, which in a report published Tuesday said that while RGGI meets the criteria set out in the final version of the EPA’s Clean Power Plan (CPP) released this summer, the scheme’s cap and how quickly it decreases needs to be modified, as does the market’s supply safety valve.
The finalised CPP rules encourage the use of multi-state, mass-based emissions trading schemes to help meet a national target to cut power plant emissions by 32% below 2005 levels by 2030.
RGGI, which currently regulates 22% of the region’s GHG emissions, will help its nine current member states reach their reduction targets, but not before the scheme’s cap is extended out to 2030 from 2020 currently, Acadia said.
“Determining the path of the post-2020 cap will be a focus of the 2016 RGGI Program Review, and it will be important for the RGGI states to consider their long-term goals as part of this discussion,” it said.
2050 TARGETS
Eight of the nine RGGI states also have ambitious goals to cut their GHGs by around 80% by 2050, based on varying baselines, and Acadia said the region will need to find savings of 311 million short tons of CO2e from 2012 levels to reach those targets.
The authors said that the current 2.5% annual decrease in RGGI’s emissions cap will fall short in getting states to their 2050 goals, and possibly the 2030 CPP targets as well.
“The RGGI cap as currently structured will not guarantee compliance with the CPP, nor will it put the RGGI states on a path to meet their long-term goals,” the report said.
Acadia said a return to absolute annual cap reductions, rather than the percentage cuts implemented following RGGI’s last program review in 2012, is required.
It called for the cap, which was slashed by 45% to 91 million tons in 2014 to expunge a massive supply glut, to decrease annually by 2.5% of that – equating to a linear reduction of 2.275 million tons per year through 2050 that would result in a cumulative 90% cut in power sector emissions during that period.
CCR
The Acadia Center also called for the restructuring or removal of the RGGI’s Cost Containment Reserve (CCR), which is a pot of 65 million allowances available between 2014 and 2020 that is tapped should auction prices rise above pre-set levels.
The CCR has been triggered in the past two years, effectively raising the scheme’s cap by 15 million tons.
Some 5 million CCR allowances, the maximum available in 2014, were snatched up by market participants last year, followed by 10 million this year.
“Restructuring the CCR design to draw allowances from under the existing cap level would help to ensure future environmental performance by limiting the overall quantity of allowances to a level that reflects reduction targets,” the Acadia report said.
The authors said that these reforms will allow the nine states to achieve a total 27% of their 2050 economy-wide GHG reductions through RGGI, compared to 1% if the scheme is not strengthened.
They added that reducing power sector emissions through RGGI is “likely the most effective means of achieving states’ GHG requirements.”
“Achieving fewer emissions reductions from the power sector would require potentially costlier reductions from transportation and industry.”
By Mike Szabo – mike@carbon-pulse.com
