Climate

The Northeast’s Electricity Bills Have Dropped $460 Million Since They Started Paying For Carbon

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A regional cap-and-trade program has added $1.3 billion in economic activity to nine New England and Mid-Atlantic states since 2011, while decreasing their carbon emissions by 15 percent, according to independent analysis released Tuesday.

In addition to stimulating the economy and reducing carbon, the Regional Greenhouse Gas Initiative (RGGI) has also reduced the cost of electricity for consumers, saving residential, businesses, and public users $460 million, the report from the Analysis Group found.

These benefits mean that RGGI (pronounced “reggie”) could be a model for other states looking to reduce carbon emissions under the Environmental Protection Agency’s Clean Power Plan, set to be released next month. The Clean Power Plan requires states to lower carbon emissions from the electricity sector, but lets states choose how they reduce those emissions.

“The nine New England states’ experience with RGGI can provide other states with valuable lessons for how one might comply with the CO2 regulations included in the Clean Power Plan,” Andrea Okie, a report author, told ThinkProgress.

Under the RGGI plan, nine states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont — have reduced the amount of carbon allowed from electricity producers by requiring them to buy a credit for every metric ton of carbon they emit. There are only a limited number of permits, which are put up at auction every quarter. The states use the proceeds from the auctions to invest in further carbon reduction programs, such as efficiency retrofits and renewable energy development. (New Jersey initially participated, but withdrew in 2011 under Republican Governor Chris Christie).

“From an economists’ perspective, directly putting a price on carbon the way RGGI does is the most efficient way to regulate carbon,” Okie said. In fact, the program has been so successful that after a 2011 review, the states agreed to lower the overall emissions cap.

But as a macro-economic driver, the key to RGGI’s success has been the reinvestment of money from the carbon permit auction, Okie said. So far, the states have spent 59 percent of the funds on energy efficiency; 15 percent on renewable energy projects; 13 percent on bill-payment assistance to energy consumers; 12 percent on other greenhouse gas programs and program administration; and 1 percent on clean technology research and development, the report found.

For example, investing in efficiency programs — such as weatherizing houses — reduces the amount of electricity used. But that’s not actually why bills are going down. The decrease in electricity demand actually reduces the overall price of electricity. That means the costs go down for everyone, not just someone who installed new, efficient windows.

So while opponents of the Clean Power Plan say that it will raise electricity prices for consumers and depress the economy, putting a price on carbon can actually have the opposite effect.

The EPA’s Clean Power Plan, expected to be released next month, will require states to reduce the amount of carbon emitted from the electricity sector. Electricity accounts for a third of all carbon emissions in the United States, largely due to the use of coal-fired power plants. Developing multi-state or even individual systems to price carbon is one way states will be able to comply with the EPA standards.

Then report was released at a meeting of the National Association of Regulatory Utility Commissioners (NARUC) in New York. NARUC members will play a critical role in developing state compliance plans for the EPA rule — and they want plans that won’t drive up costs. RGGI is a clear example of how a program that reduces carbon can also bolster the economy, the report shows.

Another report, released Tuesday by Ceres, a nonprofit organization that encourages sustainable business practices, found that across the board, utilities are decreasing their emissions. The 2015 Benchmarking report looked at the 100 largest electricity supplier in the country and found that of the 42 states that have reduced their emissions since 2008, the average reduction has been 18 percent. (RGGI states have reduced their emissions 40 percent during that time).

Jackson Morris, director of the eastern energy program for the Natural Resources Defense Council (NRDC), agreed that efficiency measures have been critical for lowering emissions across the industry. In the 1950s, the amount of electricity we used increased alongside our economic growth, he said. Now there are so many ways to become more efficient, projections for our future electricity needs are flat in some places. In other words, we are getting more efficient as quickly as we are needing more power.

But there are other downward pressures on emissions from the electricity sector. Notably, renewable energy is a greater portion of generation than ever before. In addition, we’re seeing many of the older, high-carbon emitting power plants go offline.

“A generation of power plants built in the fifties are finally dying,” Morris told ThinkProgress. “A lot of those were not only burning coal, they were burning less efficiently — imagine a car that’s not only burning leaded gas, but getting three miles to the gallon.”