Patrick-Murray Administration Announces Historic Nine-State Agreement to Significantly Lower Greenhouse Gas Emissions from Power Plants
RGGI Pact Cuts Carbon Cap to 91M Tons per Year in 2014, Lower in Subsequent Years
BOSTON – Thursday, February 7, 2013 – The Patrick-Murray Administration today announced that Massachusetts and eight other states have reached an agreement to reduce carbon dioxide emissions from power plants by 90 million tons over the next six years. This reduction is about 30 times the amount of emissions released from the state’s largest power plant.
Massachusetts and the eight other states – Connecticut, Delaware, Maine, Maryland, New Hampshire, New York, Rhode Island, and Vermont – are all part of the Regional Greenhouse Gas Initiative (RGGI), the nation’s first mandatory “cap-and-trade” program for carbon dioxide emissions. Each state has agreed to seek the necessary changes to its laws or regulations to implement the agreement by early 2014.
The agreement calls for the nine states to lower an existing “cap” on power plant emissions from the current level of 165 million tons per year to 91 million tons per year. This will generate an estimated $350 million in additional revenue for Massachusetts during the period 2012-2020. These revenues will be invested primarily in helping Massachusetts businesses and residences become more energy efficient.
“This agreement means lower greenhouse gas emissions for the region and increased growth and opportunity in our clean energy economy, a major driver of job creation here in Massachusetts,” said Governor Deval Patrick. “It is also a strong statement that this region, which comprises nearly 20 percent of the national economy, is serious about being stewards of our environment and addressing climate change.”
RGGI is a collaborative effort to limit carbon dioxide (CO2) emissions from the power sector by requiring that certain power generators purchase “allowances” for the emissions of carbon dioxide. RGGI has worked successfully to lower power plant emissions, providing the nine member states with allowance proceeds that they have invested in the clean energy economy.
An independent analysis concluded that the first three years of the RGGI program (from 2009 through 2011) are resulting in:
- $1.6 billion in net present economic value added to the region, and $400 million to Massachusetts alone,
- Electricity consumers overall – households, businesses, government users, and others – enjoying a net lifetime gain of nearly $1.1 billion, as their overall electric bills drop over time,
- A lowering by more than $765 million in the total dollars that Massachusetts and the RGGI states send outside the region in the form of payments for fuel, and
- 16,000 new “job years” being created.
The proposed revisions followed a comprehensive two-year program review. The RGGI states determined that the current supply of allowances in the nine-state region (165 million) is far in excess of the demand (91 million in 2012). This is due to a number of factors, including a decline in the price of natural gas, which has reduced power plants’ burning of coal, reductions in electric demand due to energy efficiency measures, a slowdown in the economy, and atypical weather patterns. As a result, allowance prices have dropped to the “floor” price of $1.93 per ton and, without a change, the current cap will not help further to reduce CO2 emissions.
The RGGI Agency Heads agreed that emissions should be reduced, and selected 91 million tons in 2014. At this level, the supply of allowances is aligned with projected demand (emissions). The RGGI Agency Heads further determined that the cap should be reduced by 2.5 percent per year after 2014, so that by 2020, emissions from the nine RGGI states will be substantially lower than they are today.
“This is one of the largest greenhouse gas reduction measures that we have seen, and the best part is that it is not just Massachusetts doing the reduction – eight other states are joining us,” said Energy and Environmental Affairs Secretary Rick Sullivan. “I applaud the Governor’s leadership on this issue and am proud that Massachusetts is a driving force behind this second historic agreement.”
“The 2008 Global Warming Solutions Act put Massachusetts on a path to make steep reductions to its greenhouse gas emissions. This agreement will help the Commonwealth reach our ambitious goals,” said Kenneth Kimmell, Commissioner of the Department of Environmental Protection and one of the state’s two representatives who negotiated the agreement. “I am also pleased that a bi-partisan group of energy and environmental commissioners from nine states recognized that this is not only good environmental policy, but good economic policy for each of the states.”
“We have shown time and time again that investing in energy efficiency means savings for Massachusetts’ businesses, cities and towns, and residents,” said Mark Sylvia, Commissioner of the Department of Energy Resources and one of the state’s two representatives who negotiated the agreement. “I am excited that this agreement and the auction proceeds that follow continue to support our nation-leading energy efficiency investments, which in the next three years will yield more than three dollars of benefits for each dollar invested.”
While the price for allowances are expected to rise, the agreement also calls for the establishment of a “cost containment reserve” that would stabilize prices for allowances in the event of unforeseen circumstances, such as a shortage of natural gas. The cost containment reserve will inject additional allowances into the marketplace if allowance prices reach certain price triggers ($4 per ton in 2014, $6 in 2015, $8 in 2016, and $10 in 2017, rising by 2.5 percent, to account for inflation, each year thereafter).
The RGGI Board of Directors conducted extensive modeling on the impacts of these changes on consumers. The modeling shows that the impacts of the new cap will be extremely modest, less than 1 percent in consumer bills. The average Massachusetts residential customer’s monthly electricity bill of $72 will rise by 39 cents; the average commercial customer’s monthly bill of $455 will rise by $3.89, and the average industrial consumer’s monthly bill of $6,659 will rise by $83. One reason the bill impact is modest is because Massachusetts invests more than 80 percent of the RGGI proceeds into energy efficiency, and for each dollar invested, a consumer saves approximately $3 from reduced energy usage.
For more information on how the RGGI cap-and-trade program benefits Massachusetts, turn here: http://www.mass.gov/eea/grants-and-tech-assistance/guidance-technical-assistance/agencies-and-divisions/doer/regional-greenhous-gas-initiative.html.
For more information about RGGI Inc. and the nine-state effort to reduce carbon emissions, turn here: www.rggi.org.