Benefits of the Regional Greenhouse Gas Initiative
How Cutting Pollution Protects New Jersey's Environment, Builds the Economy, and Reduces Energy Costs
In 2005, New Jersey joined nine other Northeastern states in a landmark agreement to limit global warming pollution from the region’s power plants. This agreement, known as the Regional Greenhouse Gas Initiative (RGGI), is designed to clean up pollution from power plants while fueling the transition to a clean energy economy. New Jersey has benefited from RGGI through the investment of funds from the sale of pollution allowances in clean energy projects—projects that are cutting pollution, benefiting energy consumers and creating new economic opportunities.
Environment New Jersey Research and Policy Center
In 2005, New Jersey joined nine other Northeastern states in a landmark agreement to limit global warming pollution from the region’s power plants. This agreement, known as the Regional Greenhouse Gas Initiative (RGGI), is designed to clean up pollution from power plants while fueling the transition to a clean energy economy.
New Jersey has benefited from RGGI through the investment of funds from the sale of pollution allowances in clean energy projects–projects that are cutting pollution, benefiting energy consumers and creating new economic opportunities. By 2018, New Jersey’s ongoing investment in clean energy programs through RGGI will help the state avoid 127,000 metric tons of global warming pollution annually, or as much as is produced by more than 24,300 of today’s passenger vehicles.
New Jersey can achieve even greater benefits by remaining in the RGGI program, directing funds generated through the program to clean energy projects, and working with other Northeastern states to strengthen RGGI in the years ahead.
RGGI is already delivering benefits to New Jersey’s environment, consumers and the economy.
- Environment: Clean energy investments through RGGI have already eliminated the need for 52,000 MWh of electricity generated from fossil fuel sources each year–enough to power nearly 6,000 New Jersey homes. So far, these investments have enabled New Jersey to cut its global warming emissions by 13,100 metric tons per year–equivalent to taking 2,500 passenger vehicles off the road.
- Consumer costs: RGGI is saving money for consumers. According to a recent study by Analysis Group, RGGI’s emission cap has caused an 0.7 percent increase in electricity bills–an increase of less than one-half of 1 percent of annual energy expenditures for New Jersey homes and businesses. Those costs, however, will be more than made up for over time by reductions in energy consumption driven by RGGI programs. According to Analysis Group, RGGI’s investments thus far will lead to average energy savings of $25 per residential customer across the Northeast. In New Jersey, total energy bill savings will amount to approximately $150 million.
- Economic benefits: RGGI is helping to fuel the transition to a clean energy economy in New Jersey. RGGI has led to the installation of approximately 7.5 megawatts of solar energy in New Jersey and the creation of nearly 1,800 job-years of employment in the state, according to ENE-Environment Northeast.
New Jersey can reap even greater benefits by simply staying in the program, even if pollution allowance prices remain low.
- Environment: Even if pollution allowance prices remain at current low levels, New Jersey would achieve significant emissions reductions by simply staying in RGGI and directing program revenues to clean energy programs. By 2018, New Jersey will avoid 127,000 metric tons of carbon dioxide pollution annually–the equivalent taking 24,300 of today’s passenger vehicles off the road.
- Consumer costs: The cost of pollution allowances under RGGI is projected to remain low through 2018. Remaining in the program and investing revenues from the program in clean energy programs would eliminate demand for 461 gigawatt-hours (GWh) of centrally generated electricity per year–enough to power 52,000 typical New Jersey homes, and reducing the need for costly investments in new generation and transmission capacity.
- Economic benefits: Remaining in RGGI would enable the state to install 100 MW of solar and 95 MW of combined heat-and-power capacity (assuming the state continues its current practices of clean energy investment), fueling continued growth in the state’s clean energy economy.
By working with other Northeastern states to strengthen RGGI, New Jersey can maximize the benefits of the program.
- Environment: By adjusting RGGI’s emission cap to reflect real (as opposed to projected) 2009 emissions and doubling the reduction target to achieve a 20 percent reduction in emissions by 2020, the Northeastern states could reduce carbon dioxide emissions region-wide by 31 million tons annually by 2020–the equivalent of taking about 5.9 million of today’s cars off the road.
- Consumer and economic benefits: Strengthening RGGI’s emission cap would result in only a small impact on electric rates–with the cost of allowances causing an average increase of only 3.6 percent even at allowance prices of $10 per ton of carbon dioxide–and accelerate New Jersey’s transition to a clean energy economy with the installation of between 370 to 730 megawatts of clean, in-state electricity generation—enough to replace one mid-sized coal-fired power plant.
To take advantage of RGGI’s potential to clean up pollution from New Jersey’s power plants and move the state toward a clean energy economy, New Jersey’s leaders should:
- Remain in the RGGI program. Gov. Christie should reverse course and move to keep New Jersey in the RGGI program. By remaining within RGGI, New Jersey can continue to work side-by-side with other Northeastern states on solutions to the region’s energy and pollution problems.
- Support strengthening RGGI’s cap on carbon emissions. When the originators of RGGI established a cap on global warming pollution in 2005, they set a cap on emissions based on projected 2009 levels, which turned out to be much higher than the region’s actual emissions–understandable given the inherent uncertainty of modeling future emissions scenarios and energy market variables four years into the future. Now, however, with the benefit of experience, the region should reset the cap to begin from the actual level of emissions in 2009, rather than the incorrect projections of a half-decade ago. To ensure that the region’s power plants clean up their act, the RGGI states should require emission reductions of 20 percent by 2020 and 40 percent by 2030.
- Restore the use of RGGI revenues to support clean energy programs in New Jersey. By reinvesting funds from the sale of pollution allowances in clean energy programs, RGGI states can hasten the transition to a clean energy economy while reducing the costs of energy for all consumers. Unfortunately, Gov. Christie has diverted more than half of RGGI funds intended for clean energy programs to plug state budget gaps, missing out on the opportunity to make critical clean energy investments. As experience from the past three years of RGGI has shown, the program is a strong economic engine and reduces energy costs for all consumers, but only when funds are spent on clean energy or energy efficiency programs as initially intended. In the future, New Jersey should allocate all RGGI revenues to clean energy and energy efficiency.