The first mandatory carbon trading program in the United States has delivered US$1.4 billion in economic benefits over the last three years, while creating jobs and reducing power plant emissions for the nine northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI), according to a review released last week by the Analysis Group.
Over the full nine years of the program, the states have taken away at least $4 billion in benefits, excluding a reduction in health costs and damages due to climate change, as well as the dollars participating states saved by buying less fossil fuel from out-of-state suppliers, InsideClimate News reports. That saving alone added up to $1.37 billion over the last three years.
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“RGGI’s nine years of experience supports a conclusion that market-based CO2 emissions control programs can produce positive economic impacts and meet emissions objectives, while dovetailing smoothly into the normal operation of power systems,” the report stated.
The report attributed the savings to the way the RGGI states invested the proceedings from their carbon cap-and-trade program. “The biggest payoff came in investments in energy efficiency programs, which have led to more businesses and jobs in activities such as energy audits and installing energy efficiency equipment,” ICN notes. “The analysts also found that the cap-and-trade system has not undermined the reliability of the electricity grid, and it has not led to a net increase in electricity bills.”
The report concluded that RGGI created 14,500 job-years of employment over three years, and more than 40,000 over nine.
Between 2009 and 2017, the program cap—the volume of carbon for which power plant owners could buy credits—declined from 188 to 84.3 million tons. That arrangement led to $901 million in costs over the last three years for operators that burned fossil fuels. “But while those costs are ultimately passed on to consumers, the consumers end up with a net benefit under the program because of how states put that money to work,” ICN writes, citing report co-author and Analysis Group senior advisor Sue Tierney.
“That’s an out-of-pocket cost to consumers in the very short run, but in the long run consumers don’t spend as much on electricity because of the investment of the proceeds on energy efficiency,” Tierney said. The efficiency work reduced the amount of energy the states needed, while renewable energy investments cut into their reliance on higher-priced power plants.
The ICN story traces RGGI’s early difficulties setting a stringent enough carbon cap, as well as the factors that drove emissions down faster than expected. “The drop was due to many factors, including government policies, the economic downturn, and the declining competitiveness of coal as a fuel for power plants,” writes reporter Dan Gearino. One study in 2014 “determined that the carbon program had more of an effect than those other factors, but the other factors were significant.”
