The report, The Economic Impacts of the Regional Greenhouse Gas Initiative on Nine Northeast and Mid-Atlantic States, was just presented in New York City at a conference that gathered the nation’s utility regulators. The Analysis Group’s study carries significant weight because it’s the first to examine the entire macroeconomic impact of a carbon control strategy in real life and in real time. In specific, the report examined the effects of RGGI, a program that has been assessing costs on carbon emissions in the Northeast for six years. The report’s stated methodology:
Track the path of RGGI-related dollars as they leave the pockets of competitive power generators who buy CO2 allowances to demonstrate compliance, show up in electricity prices and customer bills, make their way into state accounts, and then roll out into the economy through various pathways.
Under RGGI, power generators pay for carbon emissions allowances, and the price is reflected in power prices to consumers and businesses. The proceeds are plowed back into the regional economy for work on things like energy efficiency projects and renewable and/or zero carbon emissions energy sources.
The report’s findings on the benefits of RGGI may stun even seasoned energy observers. During the 2012 to 2014 time period, the RGGI carbon pricing program has led to $1.3 billion (net present value) of economic value to the economy in the nine-state RGGI region. That translates into more than $31 in value added per capita in the region, on average.
The study reveals that RGGI creates jobs, too. This happens through the multiplier effect of reinvestment of RGGI auction dollars. According to the Analysis Group, in just the past three years, the RGGI carbon pricing system has created over 14,200 new job hours, with each of the states showing net job additions. That’s in addition to the 16,000 new job hours that were created in the initial three years of RGGI. These new jobs are spread throughout the economy. The study’s authors report:
“The states’ use of RGGI auction proceeds on energy-efficiency programs for example, leads to more purchases of goods and services in the economy… Jobs related to RGGI activities are located around the economy, with examples including engineers who perform energy efficiency audits; workers who install energy efficiency measures in commercial buildings; or staff performing teacher training on energy issues.”
Perhaps most important, the study shows that RGGI produces economic expansion of greater value than its initial energy price increases. Even better, according to the report, is that the efficiency and distribution improvements made by using RGGI money end up putting downward pressure on wholesale electricity prices, as the local grid and production becomes more efficient. This resulted in an overall savings to electricity consumers of $341 million, with another $110 million of savings going to natural gas and heating oil consumers. The report sums this effect up:
But near term price impacts are more than offset during these years and beyond, because the states invested a substantial amount of the RGGI auction proceeds in energy-efficiency programs that reduce overall electricity consumption, and in renewable energy programs that displace higher-priced electricity generation resources. In the end, consumers gain because their overall electricity bills go down as a result of state RGGI allowance revenue investments, primarily in energy efficiency but also renewable energy-focused programs.
The Analysis Group’s study also demonstrates that the RGGI market-based carbon emissions pricing approach does not negatively impact power system reliability. That is an important finding since many have tried to pre-emptively attack the Clean Power Plan, alleging that it would undermine the ability of the power generation and transmission grid to reliably deliver power to consumers.
The point of all of this, of course, is to eventually drive down carbon emissions—something that RGGI, reports the Analysis Group, does with aplomb. Over the life of the RGGI program, CO2 emissions from RGGI generation sources decreased by 35.1 million short tons, or 25.4%.
Press link for more: Michael Krancer | forbes.com