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RGGI: a Regional CO 2 Program for Power Sector

RGGI: a Regional CO 2 Program for Power Sector. Sonia Hamel Office for Commonwealth Development Presentation to the Electricity Restructuring Roundtable June 17, 2005. Overview. Overview of the RGGI Process Quick Cap-and-Trade Primer Status of the Work to Date

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RGGI: a Regional CO 2 Program for Power Sector

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  1. RGGI: a RegionalCO2 Program for Power Sector Sonia Hamel Office for Commonwealth Development Presentation to the Electricity Restructuring Roundtable June 17, 2005

  2. Overview • Overview of the RGGI Process • Quick Cap-and-Trade Primer • Status of the Work to Date • Observations on the Process • Next Steps

  3. Goal Design a Regional Cap-and-Trade Program Initially Covering CO2 Emissions from Power Plants

  4. Statistics 3rd Largest World Economy 14% US GHG Emissions 3.2% of World GHG Emissions ( Germany)

  5. Context: Early Movers on Climate Change • History of Regional Cooperation on Air Quality -- Ozone Transport Commission • NJ First to Take Official Target • New England Governors/ E. Canadian Premiers Plan (2001) (sets a target) • NY Greenhouse Gas Task Force (2001) • Now state plans in CT/RI/MA and ME (also set targets)

  6. Cap-and-Trade Program Goal: Achieve a Reduction in Emissions through a Flexible, Market-based Approach Issue Allowances (1 per ton) & Allocate Allowances to Sources Determine Total Emissions from Covered Sources Identify Sources to be Covered Set Cap Trade

  7. Why Cap-and-Trade? • Have Proven to Provide Benefits at Lowest Cost • Simple compared to Alternatives • Flexible, Market-Based • Incentive to Reduce at Source of Emissions Leads to New Innovation

  8. Regional Cap-and-Trade Program Individual State Budgets Each State Allocates Allowances Regional Cap Trade • Each State: • receives a budget (as agreed in MOU) • distributes allowances to its sources • agrees to accept allowances originating in other states • State to State Reciprocity Allows Trading • Key: Ensure Uniform “Currency” and Free Flow of Allowances across State Lines

  9. Why a Regional Program? • Moving together provides economy of scale • Greater reductions possible • More options for lower cost reductions • Larger the market, the larger the incentives for innovation • More states = greater influence on future policies

  10. RGGI Design Principles • Build on Past Success of NOx Budget Program • Maintain Electricity Affordability, Fuel Diversity & Reliability • Make RGGI Expandable to Other States • Achieve Least Cost Reductions • Stimulate Innovation w/ Clear Market Signals

  11. RGGI Progress to Date • Stakeholder Process • Technical Groundwork • Data Assembly and Analysis • Energy and Economic Modeling • Resource Panel • Website contains materials at: www.rggi.org

  12. Stakeholder Group • Stakeholders: 24 organizations and companies at the table and over 30 more observing • Electric generators (from across the geographic area, includes all fuel types) • Electric distribution companies • Energy efficiency & renewable energy interests • Energy users (industrial, commercial) • Consumer interest organizations • Environmental organizations

  13. Emissions Data by State

  14. Quantitative Impacts of a Regional Carbon Cap • Carbon emissions • Other emissions • Electricity prices • Total electricity system costs • Fuel use and diversity • Reliability • Imports and exports of electricity

  15. RGGI Progress to Date • Policy Consultation and Decision Making • Stringency of the Cap • How to set state budgets • Flexibility mechanisms for companies • Offset Credits (External to Cap) • Regional Greenhouse Gas Registry

  16. Key Issues • Agreed on Model Reference Case (base case) • Considered factors in setting cap levels to model and, ultimately, to recommend • Seek to minimize implementation costs • Decide which reductions from external sources (not covered by the cap) could qualify for credit? • How to guarantee that these offsets are real reductions?

  17. Essential Components • Stringency: looking at 10% below current levels and stabilization at current levels by 2024. • Offsets: Would reduce costs and expand benefits. Decisions to be made about what geographic area to include. • Simplicity of design: Inspire others to follow, strict accountability and flexibility

  18. RGGI Next Steps Complete Modeling and Evaluate Reasonable Cap Level from what we have learned. Complete a draft Model Rule Determine Cap Size and Mechanics Determine State Emissions Caps Begin State-by-State Decision making and Implementation Plan ongoing Cooperation between states

  19. RGGI Future Goals • Add Additional States to Emissions Market • Add Offset Categories to Program Over Time • Possible Expansion to Major Stationary Sources in Other Sectors • DEMONSTRATE SUCCESS

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