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Overview

Staff Working Group Update on Development of Potential Offsets Chris Sherry, NJ DEP RGGI Stakeholder Group Meeting Boston, MA May 19, 2005. Overview. Offsets Development Action Items -- In Process: Expand Phase-I offsets Elaborate process for expansion of offsets scope post-model rule

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Overview

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  1. Staff Working Group Update on Development of Potential OffsetsChris Sherry, NJ DEPRGGI Stakeholder Group MeetingBoston, MAMay 19, 2005

  2. Overview Offsets Development Action Items -- In Process: • Expand Phase-I offsets • Elaborate process for expansion of offsets scope post-model rule • Identify Phase-II offsets for development post-model rule • Identify options for favoring in-region offsets while maintaining international interaction • Identify options for limitation of quantitative scope of offsets Process Update: • Example model rule outline • Offsets modeling update

  3. Expansion of Phase-I Offsets • Add oil/propane, solar thermal to current natural gas end-use energy efficiency offsets standards • Would not require significant redesign of standards • Significant additional emissions reduction potential • Analyze viability of complimentary standards for industrial sector, in addition to current focus on building sector

  4. Elaborate Process for Expansion of Offsets Scope Post-Model Rule • Elaborate general standards criteria (e.g., additionality) to inform development of future standards • May be specified formally in model rule, or by agreement among participating states • Specify post-model rule development process and role of regional organization • Concurrent with development of design proposal for regional organization

  5. Identify Phase-II Offsets for Development Post-Model Rule • Stakeholder input welcomed, considering context of SWG evaluation criteria elaborated at prior meetings • What is viable for development of standards in next two years?

  6. Identify Options for Favoring In-Region Offsets while Maintaining Robust International Interaction • In-Region: • Capture environmental co-benefits • Capture investment in region (ratepayer impacts reinvested in state/region) • International: • Functional price cap (RGGI as price-taker) • Agency Heads asked for possible mechanisms to balance these policy objectives

  7. Identify Options for Favoring In-Region Offsets Possible Mechanisms: • Expansion of categorical scope based on sustained price trigger (applied to CDM, possibly EU ETS allowances) • Agency heads expressed comfort with use of EU ETS allowances, some reservations related to CDM • Would need to determine mechanism for identifying if threshold met • Discounting out-of-region offsets credits • Incentives for in-region offsets credits • Treatment through allocations (e.g., percentage of source compliance through offsets factored into state allocation methodology - presumes updating allocation)

  8. Options for Limitation of Quantitative Scope Key Issue: • Place limit on state budget? • Place limit on source? Related Issue: • Should there be any guidance on which states project developers apply to for offsets approval? • Requirement to apply to state where offset project occurs?

  9. State Budget Mechanism State emissions budget limitation (equivalent to % of state’s emissions budget): • No differentiation of RGGI allowances based on origin would be necessary • No limitation placed on individual sources (first come, first served) • Would limit number of offsets that could enter RGGI market • Could limit availability of certain offsets types if also requirement that project developers apply to state in which project occurs • Regulators could potentially be in position of denying applications based on quantitative limitation

  10. Source Limitation Mechanism Source limitation: (based on region-wide emissions % limitation applied to sources, % of individual source allocation, other?) • If limitation placed on source, an unlimited number of offsets credits could enter the market, but only a finite number of offsets credits could be utilized by individual sources to meet their compliance obligations • RGGI allowances would need to carry a marker indicating that they were generated from an offset • States would need to track compliance with this additional requirement at the end of each compliance period when emissions and allowances are trued-up for each source

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