Carbon Rising

Utility Business January 2018

In the fall of 2017, Nicaragua and Syria joined the Paris climate agreement, leaving the United States as the only U.N. member nation opting not to formally participate in the accord’s efforts to reduce the carbon emissions responsible for climate change. That doesn’t mean U.S. carbon reductions have come to a standstill. State and regional efforts have been beefing up in response to the federal pullback, and two regional carbon markets now are poised to grow as a result.

This decision has galvanized groups across the country. At the United Nation’s November climate talks in Bonn, Germany, for example, the nongovernmental U.S. Climate Action Center set up a 27,000-square-foot pavilion—the event’s largest—in the absence of an official U.S. pavilion. At the meeting, speeches by California Gov. Jerry Brown and former New York Mayor Michael Bloomberg stood in contrast to Trump delegates’ efforts to boost a greater use of coal in energy generation.

Following the November 2017 gubernatorial elections in Virginia and New Jersey, the nation’s largest carbon--trading market, the Regional Greenhouse Gas Initiative (RGGI), appears likely to grow by two new members. In Virginia, departing  Gov. Terry McAuliffe’s administration released a draft proposed rule to cap power-plant emissions beginning in 2020 and then reduce them by 30 percent over the next decade. That proposal was released on the night that Democrat Ralph Northam won the election to succeed McAuliffe. The rule would include Virginia joining the RGGI carbon-trading market. Similarly, New Jersey governor-elect Phil Murphy has vowed to return his state to the RGGI.

The nine-state RGGI (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) first established a carbon dioxide (CO2) cap on its members in 2009, and that cap has been lowered steadily over the subsequent years. Fossil-fuel power plants with a capacity of 25 megawatts or larger within the participating states purchase CO2 allowances through quarterly auctions, with the resulting proceeds paying for a range of energy-related programs, including efficiency upgrades, renewable energy investments, greenhouse gas abatement and direct bill assistance.

According to RGGI figures, power-sector emissions in participating states have dropped by almost 50 percent since 2008, with CO2 auctions raising more than $2.7 billion. In September, the states committed to a plan that would see a further reduction in the cap of 30 percent between 2020 and 2030, a 65 percent reduction versus the limit the group first set in 2009.

If Virginia were to join the group, it would become the largest carbon emitter and expand the market by 40 percent. Among the current lineup, New Jersey would be the third biggest emitter were it to rejoin.

On the West Coast, California’s decade-old carbon market has the Canadian province of Quebec as a partner, with neighboring Ontario soon to join. Washington State and Oregon are both exploring carbon cap-and-trade programs that could align with the California market. Brown has even been talking with European leaders about the possibility of linking his state’s market with that of the European Union, the world’s largest such exchange.

Finally, a number of RGGI states also are among the 14 states, along with the Commonwealth of Puerto Rico, participating in the recently formed United States Climate Alliance, a group that gathered on June 1, 2017, the same day President Trump announced his intent to withdraw from the Paris agreement. Alliance members already are on track to reduce their greenhouse gas emissions by 24 percent to 29 percent by 2025, compared to 2005 levels.

The carbon trading concept is expanding beyond power generation. In November, eight of the RGGI states—Maine, excepted—and the District of Columbia announced their intent to pursue a similar approach to transportation-
related emissions. Transportation comes in a very close second to power generation, in terms of greenhouse gas emissions, accounting for 27 percent of 2015’s emissions, compared to 29 percent for electricity production, according to the U.S. Environmental Protection Agency.

Such a move to clean up transportation could gain support among those generators now under pressure to produce greener power, because it would certainly mean a big push toward electric cars, trucks and buses. Across much of the RGGI’s Northeast and Mid-Atlantic territory, electricity demand has fallen steadily over the last decade, making it more difficult for utilities and independent power producers to earn a return. A move to electrify transportation could get utilities’ bottom lines back in the black and lead to a significant drop in greenhouse gases as a result.

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at chuck@chuck-ross.com.

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