RGGI, Steady, Go!

The Regional Greenhouse Gas Initiative (RGGI) this morning announced (pdf) its revised rules to create a cap and trade program for power plants in seven northeastern states. More modest than the Kyoto protocol, RGGI caps power-plant based CO2 at current levels from 2009 until 2015, then follows with a 10% reduction by 2019.

Two states, Massachusetts and Rhode Island, have already dropped out, citing increased energy costs to consumers.

We’ve been following two important questions related to the RGGI.

First, will regional efforts tip the hand of the federal government on carbon regulation? RGGI does seem to do this at least a little bit. Tim Gardner’s Reuters headline reads, “Northeast states to act on CO2 where Bush won’t.” However, while the trading regime is ambitious, the actual commitment is quite modest and restriced to the power sector. While we welcome the advance, until RGGI hooks up with other regional efforts, we don’t expect Washington to be propelled into action.

Second, many people have been wondering how renewable energy will be treated in emissions trading regimes. TerraPass supports wind farms by purchasing Renewable Energy Certificates (RECs). Will the market for RECs collapse when we have cap and trade?

We’ve always felt that regulated markets, when the finally come, shouldn’t destroy the thriving voluntary renewable energy markets that already exist. There’s no technical reason that cap-and-trade can’t co-exist with RECs, and to suggest otherwise is sheer laziness on the part of policy makers.

RGGI has come down on on our side. Partially. Despite forceful arguments (pdf) in favor of RECs from the Center for Resource Solutions, the rules ultimately leave it up to member states to provide a mechanism for incorporating voluntary purchases of renewable energy from companies like TerraPass. While not a mandatory part of RGGI, at least the right decision can be made at the state level.

We’ll be tracking those state-based set-asides very closely to see if we can support wind in the northeast RGGI states.

Overall, though, the important point is that we’re seeing real progress with RGGI. The fact that seven states are agreeing to limit their power sector CO2 emissions is something we can all celebrate.