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Market anxiously awaits conclusion of RGGI program review

The nine participating states in the Regional Greenhouse Gas Initiative are said to be close to announcing a decision regarding the size and timing of deeper emissions cuts in the coming years.

The states are wrapping up a program review that began at the start of 2016, with a focus on strengthening various design elements, most notably the RGGI emissions cap after 2020.

But RGGI officials have remained tight-lipped regarding internal discussions. Although there has been chatter that a decision regarding the specifics of the emissions cut has already been made, a public announcement is not expected until September, at the earliest, after various modeling scenarios are completed and a final stakeholder meeting is held.

"The RGGI states are still working to evaluate design elements for the program and to move forward with a consensus that meets the needs of every RGGI state. The RGGI states have not set a deadline for the conclusion of the program review, but will communicate with stakeholders and provide updates as they are available regarding future meetings and materials," Katie Dykes, chair of the RGGI Inc. board of directors and chair of the Connecticut Public Utilities Regulatory Authority, said in an Aug. 11 emailed statement.

In the ensuing months, officials from several of the RGGI states, including Maine and Maryland, have expressed worries that a tighter emissions ceiling could cause potential economic harm, translating into higher costs for consumers. Nonetheless, these states remain focused on getting "the best environmental result."

"From day one, Maryland's goal has been to keep the RGGI partnership strong and effective to cut emissions more deeply and broadly, while reducing costs to ratepayers and preventing dirty energy leakage from non-RGGI states. We're making real progress on all fronts and that's good news for the environment, locally and globally," Ben Grumbles, Maryland Department of Environment Secretary, said in an email to S&P Global Market Intelligence.

Parties from the environmental sector believe the RGGI states should opt for the most stringent emissions cap reduction to keep the participating states on course to reach their climate goals.

"We are hopeful that the [RGGI] states will heed the overwhelming call from constituents and stakeholders to significantly strengthen the program from 2020 to 2030," Josh Berman, a staff attorney with the Sierra Club, said during an Aug. 8 phone interview.

Amid a lack of climate leadership at the federal level, the Sierra Club is confident that the RGGI states will opt for the most aggressive cut in the program's emissions ceiling that is under consideration, Berman added.

The RGGI cap for 2017 is set at 84.3 million tons and declines 2.5% each year until 2020. To account for the banked allowances in the market, there were interim adjustments to the cap made for the years, which are applied each year between 2014 and 2020. The 2017 RGGI adjusted cap is 62.5 million tons.

Updated modeling presented by RGGI at its last stakeholder meeting at the end of June showed several options under consideration: a 2.5% cut per annum post 2020; a one-time cap reduction of 6.5% in 2019, followed by a 3% cut each year after 2020; and a 3.5% cut per annum post 2020.

According to a recent analysis from the Natural Resources Defense Council, or NRDC, the nine RGGI states could raise $3.2 billion more for their respective states' clean energy programs by deciding on the most stringent cap proposal — the 3% cut post 2020 with the 6.5% reduction in 2019. This scenario would peg the RGGI base cap at 74.95 million tons in 2019.

"The more ambitious a carbon cap the RGGI states adopt now, the more money the states can use to support clean energy and enjoy the many benefits that come along with it. Now is the time for the RGGI states to seize this opportunity by committing to a carbon cap that is at least as ambitious as the tightest cap they've put on the table, to create a no-regrets policy that helps cost-effectively cut carbon pollution from power plants and support the clean energy solutions that the region's residents desire," the NRDC wrote.

Since 2008, a year before its launch, the RGGI states have cut carbon emissions from the electricity sector by about 40%, according to statistics from the Acadia Center, a nonprofit research and advocacy organization for a clean energy future.

In 2015, RGGI emissions were 6.3% below the program cap and 37% below emissions levels across the region in 2008.

The RGGI states are comprised of Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. They use a market-based cap-and-trade program to reduce greenhouse gas emissions from regional power plants, selling nearly all emissions allowances through auctions and investing proceeds in energy efficiency projects.

In RGGI's most recent quarterly auction held in June, 100% of the 14,597,470 carbon dioxide allowances on offer were purchased at a clearing price of $2.53/ton. The clearing price was down 47 cents, or almost 16%, from the program's prior auction price of $3.00/ton in March and slumped to the lowest level in nearly five years since the RGGI December 2012 sale.

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