States Diverting Money From Climate Initiative November 29, 2010Posted by Laura Arnold in Emissions Trading/Cap and Trade.
Tags: climate change, Purdue University Climate Change Research Center, Reggie, Regional Greenhouse Gas Initiative (RGGI)
November 28, 2010
By MIREYA NAVARRO
In New York, government officials found $90 million to pay for schools by dipping into money generated by a multistate greenhouse gas initiative.
In New Hampshire, the state took $3.1 million from a similar environmental fund. And in New Jersey, the government diverted its whole share: $65 million.
At least three financially troubled states have discovered in the Regional Greenhouse Gas Initiative, a cap-and-trade system, a convenient pool of money that can be drawn on to help balance state budgets.
In just over two years, the initiative, known as RGGI, has generated more than $729 million for the 10 states that have participated. Each state is supposed to use its share of the money raised to invest in renewable energy and to promote energy efficiency and consumer benefits, like programs that help low-income electricity customers pay their utility bills.
But the money is proving too much of a temptation for states not to use in other ways.
Critics say that diverting money from the fund for general spending, instead of using it on emissions control and energy savings, makes the initiative little more than a hidden tax on electricity.
Already, RGGI opponents in New Jersey have sponsored a bill to end the state’s participation.
“This is nothing but a new form of taxation, and environmentalists have been used,” said Steve Lonegan, New Jersey state director for Americans for Prosperity, a conservative group founded and largely financed by oil industry interests.
Under RGGI, which is pronounced Reggie, 10 Northeast and Mid-Atlantic states agreed to cap carbon dioxide emissions from electric power plants and charge the plants for the emissions they produce. As an incentive for power plants to pollute less, the states allow the plants that cut their emissions below the cap to sell or trade their excess carbon allowances through online auctions four times a year.
The agreement binds the states to spend at least 25 percent of the money on direct consumer benefits or “strategic” energy purposes.
The participating states have agreed to devote virtually all their RGGI money to energy-use reduction. Administrators of the system say that, even with the diversion of money by state governments, about 80 percent of the proceeds for carbon credit auctions still goes to such programs.
Some environmentalists who support the multistate pact agree that without the investment in programs that cut energy use and create green jobs, the initiative’s potential economic benefit becomes an expense.
“There’s a direct consequence for taking this money,” said Jeff Tittel, director of the New Jersey chapter of the Sierra Club. “Families are going to pay higher energy bills this winter if they didn’t weatherize their homes.”
At the national level, efforts by Democratic leaders and the Obama administration to include a cap-and-trade scheme as part of a national energy policy were contested in Congress, with opponents branding it “cap-and-tax” and Tea Party followers singling it out as a symbol of what was wrong with Washington. But the controversy over cap-and-trade has percolated down to the states, where it became fodder for some candidates in the midterm elections and sparked anti-RGGI rallies in New York and New Jersey, organized by Americans for Prosperity.
“We don’t need this when the federal government didn’t go forward with a national plan,” said Alison Littell McHose, a Republican assemblywoman in New Jersey who sponsored the bill to get that state out of the initiative.
Some opponents said they feared that the multistate system would encourage cap-and-trade to spread. “The other states are watching this program to see if they can get away with it,” Mr. Lonegan said.
Two agreements similar to RGGI — the Midwestern Greenhouse Gas Reduction Accord, with six states and one Canadian province, and the Western Climate Initiative, with seven states and four Canadian provinces — envision their own cap-and-trade systems. The regional groups have their own rules and features, but the 23 states in them have discussed linking efforts.
The regional carbon-trading market among the states has been free of speculation, administrators for the initiative say, and so far most carbon credits have been purchased by power suppliers. The main criticism from environmental groups is that the cap on emissions is too lax — in fact, power suppliers have easily met their caps, and carbon credits are trading at bottom-level prices, because plants are taking advantage of cheap prices for natural gas, which pollutes less than fuel sources like coal.
But with the renewed opposition, “now we’re going to be fighting to save RGGI,” Mr. Tittel of the Sierra Club said, rather than focusing on strengthening and expanding the program.
Gov. David A. Paterson of New York set the precedent last year when he took $90 million from the money generated by the initiative to deal with a projected state budget deficit of nearly $50 billion through March 2013. New York has so far collected $265 million from RGGI, the most of any of the participating states.
Peter Iwanowicz, the governor’s environmental adviser and acting commissioner of the State Department of Environmental Conservation, called the action “a one-time deal.”
“New York was facing historic deficits,” he said. “It wasn’t a decision that was made lightly.”
In New York, much of the money in the fund has gone to investments in alternative energy technologies, training for green jobs, and energy efficiency programs like subsidized energy audits for homes and other buildings. The energy initiative has added 72 cents to the monthly electricity bill of New Yorkers, Mr. Iwanowicz said, but he noted that because of reductions in energy use and cheaper fuel prices in the last two years, customers might not have seen a rise.
In New Jersey, Gov. Chris Christie said that the state would use its $65.2 million in RGGI money to help offset a $10.7 billion budget deficit for fiscal year 2011. Mr. Christie has yet to add his voice to calls among fellow Republicans to withdraw from the cap-and-trade regional group. Still, some experts note that the availability of RGGI money to help states deal with their economic woes may be the very thing that saves the initiative and similar accords.
“The states are so broke that it’s going to be unbelievably difficult for them to stop this program,” said Leigh Raymond, the associate director of the Climate Change Research Center at Purdue University. “They’re desperate for money.”