The Regional Greenhouse Gas Initiative (RGGI) is a mandatory market-based program among nine northeastern states, including New York, to reduce greenhouse gas emissions using a cap and trade model. The initial plan, created in 2014, calls for decreases of carbon permits by 2.5 percent each year, but new discussions among member states could adjust that percentage to 3 or even 5 percent decreases in permits allotted in the coming years.
Governor Cuomo is leading the charge to get RGGI states on board with ramping up carbon emission reductions to match the goals set out in the Paris climate accord. Cuomo, along with California Gov. Jerry Brown, co-founded the U.S. Climate Alliance after the President announced his intent to withdraw from the Paris accord, asserting that cities and states across the U.S. are still committed to the Paris goals. These negotiations mark the first test for the U.S. Climate Alliance to see how firmly they stand by that commitment.
New York consistently has been below cap levels set by the RGGI, at 5 percent below the cap in 2014 and 8 percent below the cap in 2016. Under the current RGGI goals, the emissions cap would remain constant after 2020, but now, Governor Cuomo is advocating for a new goal for after 2020 that pushes for 30 percent carbon reduction below 2020 levels by 2030. Although some states that are part of the RGGI have similar carbon reduction goals to New York, a number of them will be difficult to convince to further cut their states’ carbon emissions.
However, increasing the cuts to carbon emissions permits is not the only action necessary to ensure that the RGGI program works effectively. The cap-and-trade system has a number of weaknesses that need to be addressed so that participating states effectively curb their carbon emissions.
First of all, the fact that states like New York have been consistently below the set carbon caps indicates that there is an excess of permits available. This miscalculation of how many permits should be allotted means that purchasing a permit is relatively cheap because there is an excess supply of them, thus carbon emitters can continue to emit at a low price. This presents a major obstacle to supporting clean energy because without a significant cost for carbon, energy suppliers are unlikely to look towards low-carbon alternatives.
Additionally, the RGGI states have created a Cost Containment Reserve (CCR) of carbon allowances that are available when the price of carbon is higher than a predetermined level. This means that some states may be able to exceed the cap if the cost for carbon emissions is too high. Some environmental advocates have argued to make CCR allowances more difficult to obtain, or even create a program that works opposite to the CCR so that when prices get too low the number of permits available decreases.
Getting RGGI states to agree to fewer carbon permit allotments per year would be a major step towards addressing climate change. If the system can be perfected, this market-driven solution could represent an economically viable way to incentivize clean energy in the Northeast. Governor Cuomo is fiercely advocating for other states to join New York in pursuing even more aggressive goals that uphold the Paris accord, so we will have to wait and see if his argument was convincing enough to sway the eight other states to comply.