Soldiering On: The Western Climate Initiative and RGGI in 2012 and Beyond

Soldiering On: The Western Climate Initiative and RGGI in 2012 and Beyond

January 8, 2012 20:47
by J. Wylie Donald

Last week a big step forward was taken by the Western Climate Initiative (WCI). Or what remains of it. On January 1, 2012 members were to establish binding caps on emissions of carbon dioxide from electricity generators and certain industrial sources, issue allowances for those emissions and then permit the trading of those allowances.  At least that was the plan back in September 2008 when  Design Recommendations for the WCI Regional Cap-and-Trade Program was released and when climate change response was popular and states had money in their budgets.  Since then Arizona, Montana New Mexico, Oregon, Washington and Utah have withdrawn from the WCI leaving only California and four Canadian provinces.  As the WCI puts it:  "British Columbia, California, Ontario, Quebec and Manitoba are continuing to work together through the Western Climate Initiative to develop and harmonize their emissions trading program policies."  And of those remaining only two (California and Quebec) are moving forward with a cap-and-trade program.

So is this the end of regional greenhouse gas initiatives?  After all, on the East Coast New Jersey has bolted from the Regional Greenhouse Gas Initiative, while New Hampshire attempted to bolt and New York faces a lawsuit (attached) aimed at ejecting New York.

We think not.  Our reasoning is three fold. 

First, climate change is not going away.  We are going to have to do something.  The theory behind regional initiatives -- that they act as a laboratory for experimenting with greenhouse gas regulation -- remains valid.  And until federal legislation takes over (certainly not in 2012), regional initiatives are going to be the only game in town. 

Second, organizations exist around the globe to develop manufacturing or construction or laboratory or telecommunications or you-name-it standards.   Companies ignore these organizations at their peril and often join so they can influence the result and at a minimum have inside knowledge of what the standard is and how it came to be.  Regional initiatives operate in a similar manner where the development of the rules and the issues behind them are  critical in effectively implementing the rules.  States and provinces that are out in front on climate change issues are going to have two advantages going forward.  They will have a program in place when federal rules ultimately come along; that primacy will undoubtedly influence the federal program.  And they will have experience implementing the program which likely will translate into a more effective program when compared with newly minted greenhouse gas regulators.

And third they are reported to add economic benefit.  In November RGGI released a report by The Analysis Group that analyzed  the effect of RGGI:   "The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast and Mid-Atlantic States."   

To quote the report's authors:

Key findings include:

■The regional economy gains more than $1.6 billion in economic value added (reflecting the difference between total revenues in the overall economy, less the cost to produce goods and services)
■Customers save nearly $1.1 billion on electricity bills, and an additional $174 million on natural gas and heating oil bills, for a total of $1.3 billion in savings over the next decade through installation of energy efficiency measures using funding from RGGI auction proceeds to date
■16,000 jobs are created region wide
■Reduced demand for fossil fuels keeps more than $765 million in the local economy
■Power plant owners experience $1.6 billion in lower revenue over time, although they overall had higher revenues than costs as a result of RGGI during the 2009-2011 period

This is not a surprise.  By limiting the emission of carbon dioxide, RGGI drove up, at least initially, the cost of electricity production.  This had the effect of promoting more efficient use of electricity. 

So practitioners would do well to pay attention to California's efforts.  It is likely to be the source of what ultimately happens in Washington.

Thrun v. Cuomo (RGGI Complaint).pdf (1.34 mb)

Carbon Dioxide | Carbon Emissions | Greenhouse Gases | Regulation

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