October 4, 2018

Workshop: RGGI Just One Example of Carbon Trading Program States Could Follow

Nicholas Institute for Environmental Policy Solutions
Workshop: RGGI Just One Example of Carbon Trading Program States Could Follow

The Regional Greenhouse Gas Initiative (RGGI), a cooperative effort of nine Northeast and Mid-Atlantic states to reduce carbon dioxide emissions from power plants through a market-based emissions trading program, recently marked ten years of carbon auctions. 

A September workshop in Washington, D.C.—hosted by Duke’s Nicholas Institute for Environmental Policy Solutions, Georgetown Climate Center, Resources for the Future, and the RGGI Project Series—explored how this successful carbon trading program and plans by New Jersey and Virginia to participate, might inform other states that might want to link to RGGI or implement a separate carbon trading program.

Fifteen states were represented on panels and in a web and in-person audience also comprised of more than 250 utilities and other stakeholders. A key workshop takeaway: For new states considering carbon trading, there are models to follow and these models can be customized to fit a particular state’s needs.

But if you are a state thinking about implementing a carbon trading program, how do you do it? Franz Litz, principal of Litz Energy Strategies, began the day with a helpful primer on RGGI, its evolution, and the market design options available to states.

The primer was followed by two panels. The first panel, “Linking in Action: Virginia, New Jersey, and RGGI,” was moderated by the Georgetown Climate Center’s Vicki Arroyo, and featured speakers from states that are already part of RGGI, that are looking to link to RGGI, or are rejoining RGGI.

Secretary of the Maryland Department of Environment and the current RGGI Chair, Ben Grumbles, discussed the on-going conversations between RGGI states and the other states on the panel. Grumbles emphasized the benefits Maryland has seen as a participant in RGGI and noted that as other states joined, the pollution market would become more efficient and more effective. He emphasized that sovereignty and flexibility mark state carbon trading programs.

Debbie Mans, Deputy Director for the New Jersey Department of Environmental Protection, credited advocates for making carbon trading a campaign issue that enabled Governor Murphy to make rejoining RGGI a top administrative goal. Chris Bast, Deputy Director for Virginia Department of Environmental Quality, discussed Virginia’s plans to link with RGGI states as an idea seeded by the federal Clean Power Plan. Under Governor Ralph Northam’s leadership, Bast and his colleagues adapted RGGI’s model to fit Virginia’s needs, for instance by requiring utilities to sell allowances through a consignment auction rather than running an auction directly as other RGGI states do. Both Virginia and New Jersey aim to link to RGGI by the time RGGI holds its 2020 auction.

The second workshop panel, “The Building Blocks for Successful Linking,” moderated by Kate Konschnik, Climate and Energy Program Director at Duke’s Nicholas Institute, focused on the benefits of linking state carbon programs. The panelists agreed that a larger carbon market is more efficient and can ease compliance for regulated sources.

Carrie Jenks, a Senior Vice President at the consulting firm MJ Bradley & Associates, described how to facilitate eventual linking in a program’s design, even if a state does not initially opt into a larger carbon market. States can adopt different market designs and still link, so long as a few features are harmonized.

Dale Bryk, Chief Planning Officer for the Natural Resources Defense Council, described the economic benefits of carbon markets, and raised the possibility of linking even when different states cap different sources—for instance, while RGGI states currently set a carbon cap for the power sector, states in the future might want to cover industrial sources or the transportation sector. Kathleen Robertson, a Senior Manager at Exelon, discussed how easily a carbon price may be incorporated into whole energy market bids, and why these market mechanisms are highly compatible with utility business planning. States are already linked in electric and border states are already seeing small benefits of RGGI. These benefits, she said, could be even larger if your state joined RGGI.

If you missed the workshop, or would like to revisit the discussion, watch a recording of the programming on the Nicholas Institute website.

--By Kate Cobb