lsi energy in the southwest conference, santa fe, nm...21 august 2017 lsi energy in the southwest...

21 August 2017

LSI Energy in the Southwest Conference, Santa Fe, NM

Emissions Trading

David Farnsworth, Esq.

Senior Associate

The Regulatory Assistance Project®

50 State Street, Suite 3

Montpelier, VT

United States

+1 802 498-0708

[email protected]

raponline.org

mailto:[email protected]

Regulatory Assistance Project (RAP)®

• Cap-and-Trade Introduced

• California

• RGGI

• Observations

2

Outline


Background

• Permits to emit are

allocated

• Additional permits can be

bought at state-run

auctions

• Other permits available in

the form of offsets

• Emitters can sell excess

allowances they don’t

need

• Over time, the program

(i.e., availability of

allowances) becomes

more restrictive, limiting

the amount of emissions

allowed

3

Cap-and-Trade

Regulatory Assistance Project (RAP)® 4

To reach carbon reduction goals, an economy

needs to move away from carbon-intensive

technologies and practices to those that are

cleaner and more efficient.

Carbon Management is about the Economy


“Turning the economy around is like turning an aircraft carrier around” - M r. Chapin


But Big Ships Have Grown More Maneuverable: Bow-Thruster


Can cap-and-trade policy help maneuver the economy like a bow-thruster moves a ship?


US Federal Carbon Program

• US Environmental Protection Agency’s (EPA)

Clean Power Plan withdrawn by Trump

Administration April 28, 2017

• Clean Air Act – Federalism


• WCI, AB-32 – California, Quebec

• Regional Greenhouse Gas Initiative

• Maine, New Hampshire, Vermont,

New York, Massachusetts,

Connecticut, Rhode Island,

Delaware, and Maryland

10

US State-Level Carbon Programs


• Reduce economy-wide

GHGs to 1990 levels by

2020

• Directs Air Resources

Board to adopt

regulations

• Scoping Plan sets out

the strategy

12

California’s Global Warming Solutions Act (AB 32)


Scoping Plan Structure


• CA on track to meet 2020 goal

• Recent legislation extends cap-and-

trade program to 2030

15

Current Status


• Regulators set a minimum allowance price.

• No maximum price, but state can add allowances in the

case of price spikes from high demand (State also freely

allocates some allowances to help companies comply with

the regulations. These were scheduled to start declining in

2018.)

• Offsets (cheaper allowances) available to cover 8% of

company emissions. Offsets are out-of-sector projects

(e.g., forestry improvement) and can be from anywhere in

the country.

16

Program Design (Until 2020)


• Allowance price minimum continues; stricter

maximum price adopted

• Free permits continue to be available

• Stricter offset limits:

• Can apply to 4% of emissions (2021 to 2025)

• 6% after that

• Half of an entity’s offsets must be located in

California

17

Program Design Post 2020


• Spending on projects that reduce CO2, e.g., EVs,

Bullet Train

• Majority vote in legislature required for allocation

of funds

18

Program Revenue – Today


• No Spending Plan – Open for future debate

• Constitutional Amendment to be voted on in 2018

that would require a two-thirds vote (2024) to

authorize continued expenditure of C&T revenues

19

Program Revenue – Future


• Job creation for high-skilled workers

• 5 million jobs (total payroll of $45B)

• $76B increase in Gross State Product to result

from clean energy measures

• 3.1% job growth rate in CA (c.f. 2.3% national)

• Additional benefits include increased

weatherization, water savings

Consumers Union 2015

20

AB-32 Benefits


• Nine separate state programs

that look alike and coordinate:

• Emissions cap is made of

emissions from all 9 states

• Cap largely based on

historical emissions

• Fossil-fired electric generating

units ≥25MW

21

RGGI


• Start date of January 1,

2009

• 3-year compliance

periods

• Program Reviews

RGGI


RGGI States: Pollution Reductions with Economic Growth


• Quarterly regional CO2 allowance auctions

• CO2 allowances are issued by each state

• Compliance occurs at the state level

• One tradable CO2 allowance market - CO2 allowances are fungible

across the multi-state region

• CO2 allowances issued by any participating state can be used for

compliance in any of the participating states

• Auction proceeds invested by the states (more below)

• Centralized allowance tracking and emissions tracking

— Market monitoring of CO2 allowance market

— Limited use (3.3%) of offsets

24

RGGI Mechanics in Brief


• CO2 allowance auctions are open to all

prequalified bidders

• 36 quarterly auctions held since September 2008

• Auction #36, June, 2017

• $37 million raised

• CO2 allowance auction clearing prices have

ranged from $1.86 to $7.50

25

RGGI’s Market Based System


RGGI Auction Clearing Prices Summary


• RGGI states have distributed

approximately 90% of

allowances by auction

• More than $2.58 billion in auction

proceeds through 33 auctions

• Invested $1.37 billion of auction

proceeds in range of energy

efficiency, clean and renewable

energy, direct bill assistance,

GHG abatement programs

RGGI Reinvests in the Energy Sector

RGGI Investments by Category: 2008 – 2014

Source: RGGI 2014 Proceeds Report


Cost of Primary Energy Resources2015 Lazard Analysis


Efficiency is low-cost “carbon scrubber”


Public Policy Observations


• One of RGGI’s most important design decisions

was to auction allowances (rather than give them

away for free) and

• To invest auction proceeds in energy efficiency

and other clean energy programs

31

The Role of Revenue Recycling


• RGGI auctions raised nearly $1B in its first 3 years

• States invest in existing clean energy and other

programs:

• 1st Compliance Period -- Net benefits: $1.6B

• 2nd Compliance Period -- Net benefits: $1.3B

• What benefits will be produced by California

allowance revenue investment in EVs?

32

The Role of Revenue Recycling


• Today, ≥60% of RGGI auction revenue dedicated

to EE programs:

• Saving consumers money

• Reducing emissions

• Delivering economic benefits 33

Cap-and-Invest: Role of Revenue Recycling


Reductions come, less

from the program’s price

on carbon, and more

from investing the

program proceeds

Cap-and-Invest Program


• Cap-and-trade can support:

• Auctioning

• Investment

36

Some Observations

• Cap-and-trade can be

coordinated with clean

energy policies

• Energy Efficiency

• Renewable Energy

• Demand Response

• Transportation


• Cap-and-trade must be part of a larger carbon

strategy – complementary policies (EE, RE,

watch California & Beneficial Electrification)

• Coordination important

• How should the program work with other state air

pollution and clean energy policies?

• Is a ton a ton?

• Integrated Resource Planning IRP tells us to ask: “Are we

getting the cheapest tons first?

• Why pay more than you have to?

37

Some More Observations


• Is an economy, in fact, like a big unwieldy ship,

hard to turn and maneuver?

38

• Can a policy like cap-and trade work like a bow

thruster, maneuvering it in the direction we want?


Thank You

Questions


Carbon Caps and Efficiency Resources: How Climate Legislation Can Mobilize

Efficiency and Lower the Cost of Greenhouse Gas Emission Reduction, R. Cowart

(Vermont Law Review 2008 )

Climate Issue Brief #4, State Clean Energy Policies: The Foundation for an Electric

Sector Cap-and-Trade Program, National Association of Regulatory Utility Commissioners

Quantifying the Air Quality Impacts of Energy Efficiency Policies and Programs, J.

Shenot (RAP)

Images and How We Remember History, D. Farnsworth

Climate Policy and Affordability: Advocacy Opportunities in the Northeast, Farnsworth,

D’Antonio , and Pike-Biegunska

Carbon Trading in China: Progress and Challenges, P. Parenteau and M. Cao, Mar. 2016

The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast

and Mid-Atlantic States Review of the Use of RGGI Auction Proceeds from the First

Three-Year Compliance Period, Hibbard et al, Nov. 5, 2011

40

Resources

http://lawreview.vermontlaw.edu/articles/12 Cowart Book 2, Vol 33.pdf

http://www.naruc.org/Publications/ClimateIssueBrief4_Jul2009.pdf

http://www.huffingtonpost.com/david-farnsworth/images-and-how-we-remembe_b_604784.html

http://www-assets.vermontlaw.edu/Assets/elc/Parenteau.March2016.pdf

http://www.analysisgroup.com/uploadedFiles/Publishing/Articles/Economic_Impact_RGGI_Report.pdf

http://www.raponline.org/knowledge-center/quantifying-the-air-quality-impacts-of-energy-efficiency-policies-and-programs/

http://www.raponline.org/knowledge-center/climate-policy-and-affordability-advocacy-opportunities-in-the-northeast/

About RAPThe Regulatory Assistance Project (RAP)® is an

independent, non-partisan, non-governmental

organization dedicated to accelerating the transition

to a clean, reliable, and efficient energy future.

Learn more about our work at raponline.org

David Farnsworth, Esq.

Senior Associate

The Regulatory Assistance Project®

+1 802 498-0708

[email protected]

raponline.org

50 State Street, Suite 3

Montpelier, VT

United States

http://www.raponline.org/

mailto:[email protected]


• Reinvestment reduces emissions of GHG and

other pollutants

— RGGI power sector CO2 emissions

declined over 45 percent since 2005

• By 2020 RGGI power sector emissions

projected 50% lower than 2005

• RGGI investment helps drive transition to

cleaner fuel and energy sources

― In 2015, half of total power generation in

the RGGI states was clean or renewable42

RGGI Experience: Environmental Benefits


• More than 4.6 million households and

20,000 businesses are participating in

RGGI proceeds-funded programs

• RGGI proceeds invested in energy

efficiency, clean and renewable energy,

energy bill assistance and GHG

abatement through 2014 returning

$4.67 billion in lifetime bill savings to

consumers

43

RGGI Experience: Consumer Benefits


• An independent 2015 report by the consulting

firm Analysis Group found that RGGI’s second

three years are creating:

$1.3 billion in net economic benefit

14,200 additional job-years

• In addition to benefits from RGGI’s first three

years:

$1.6 billion in net economic benefit

16,000 additional job-years

• Benefits in each state – but more with higher

energy efficiency investments

44

RGGI Experience: Economic Benefits

lsi energy in the southwest conference, santa fe, nm...21 august 2017 lsi energy in the southwest...

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