Senator Saviello, Representative Tucker, and members of the Joint Standing Committee on Environment and Natural Resources, my name is Dylan Voorhees and I am the Clean Energy Director for the Natural Resources Council of Maine (NRCM). Thank you for allowing me to present this testimony in support of this legislation. While this bill itself is not—in all honesty—especially enthralling, the Regional Greenhouse Gas Initiative (RGGI) itself is a very important and successful policy that benefits Maine in multiple tangible ways. Passage of this straightforward legislation from the Department of Environmental Protection should ensure continuity and ongoing benefits for Maine people and businesses. Many committee members may be unfamiliar with RGGI, so I have used this testimony primarily to provide some background on this initiative.
RGGI is a Market-Based Mechanism to Reduce Air Emissions with Bipartisan Support
Under RGGI, fossil fuel-fired power plants must possess carbon credits (or “allowances”) in order to emit CO2, but credits are traded freely, so it is up to the market to determine which plants want them, how many, and what they are worth. Credits are made available at periodic auctions held by the nine participating states. A limit on emissions is created by limiting the number of credits available and decreasing that number over time. Through a careful combination of policy features, RGGI provides a clear market signal, which fosters competition and maximizes economic efficiency.
RGGI was initiated in 2005 by a Republican governor wanting to apply market-based approaches, and it has since enjoyed substantial bipartisan support.[1] When RGGI was adopted by the Maine Legislature in 2007, the votes were 35-0 in the Senate and 130-7 in the House.
RGGI is Lowering Energy Costs and Creating Jobs While Improving Air Quality
Maine and the other participating states recognized early on that the value from auctioning carbon credits should be returned to the public generally and energy consumers specifically. That can be done in many ways, but the largest share regionally, and especially in Maine, has supported energy efficiency investments in homes and businesses, facilitated by Efficiency Maine.
These energy efficiency investments are very cost-effective. Between FYs 2012 and 2017, Efficiency Maine used $54 million in RGGI funds to leverage $88 million in private investment and achieve $277 million in energy savings for Maine homes and businesses.[2]
Attached to this testimony are three case studies that illustrate how these RGGI-funded programs are helping homes and businesses lower energy costs. (Maine has also used a portion of RGGI funds to provide direct electricity rate/cost reductions; currently these funds go to large manufacturers. I will avoid commentary on that choice, as spending allocations have been periodically considered and reconfigured by the Energy & Utilities Committee, including just last session.)
RGGI’s overall economic impact has been analyzed in detail by independent economists and the results show that Maine and the region have seen net reductions in energy spending and a net increase in jobs and economic activity as a result of RGGI.[3] To repeat myself, our innovative approach to reducing climate-changing carbon pollution has empirically strengthened our economy and reduced energy costs.
The air quality and public health benefits of RGGI have also been analyzed in detail, including at least $5.7 billion in quantified public health benefits.[4]
LD 1657 is the Pro-Forma Conclusion to a Robust Regional Review
Much of the success of RGGI stems from multiple states working together. For starters, the larger market means carbon reductions can be achieved at a lower cost. Furthermore, the states have benefited from formal, periodic reviews to assess the program and consider changes. These regional reviews include detailed energy sector modeling and significant opportunities for stakeholder input. In each of the two formal review periods completed to-date, the states have reached consensus on changes because they were based on documented facts and balanced interests of all of the states.
Last fall, the nine states concluded an almost-two-year review, which included a determination of how the program should operate in the period after 2020, and how to take advantage of the fact that RGGI has continually outperformed expectations for how quickly and cheaply carbon reductions could be achieved. The administrations of all nine states, including Maine, agreed to make certain changes to the “model rules,” which guide individual state rulemaking. There were no fundamental changes to RGGI, a recognition that the program is working well.
For better or worse, all the hard decisions have been made by the governors. Since the program must operate by a common set of rules across the region, individual states cannot make up their own rules and expect to continue to benefit from the regional approach.[5]
We Will Need to Do More to Address Carbon Emissions
NRCM appreciates the efforts of the Maine Department of Environmental Protection throughout the regional review process, the culmination of which was to bring forward this simple, no-nonsense piece of legislation. We urge you to vote unanimously ought to pass.
We must conclude, however, with two observations of the need for further progress. First, we are disappointed that Maine will not be participating directly in some of the new features of RGGI, namely the Emissions Containment Reserve, a new companion to the long-standing Cost Containment Reserve, which helps keep carbon prices low. We hope Maine will reconsider this in the future as we observe how this new feature works to keep carbon prices in the “sweet spot” where markets respond, consumers are protected, and revenue for energy efficiency is more stable.
Second, although RGGI has a tremendous impact on total carbon emissions in the region[6], it is not sufficient to achieve the medium- and longer-term carbon goals established over the last 15 years by the Maine Legislature and Governor LePage (e.g. a 40% reduction by 2030). RGGI only directly affects power plant emissions, which are now a shrinking piece of the total carbon pie. Transportation emissions are far and away the largest source of carbon emissions in Maine and the region. Our homes and businesses continue to burn large quantities of oil, which saps our economy as well as endangering our climate. Part of the solution is greater electrification of vehicles and heating, e.g., heat pumps, so it continues to matter a great deal where we get our power from. I hope in the coming years this committee will be part of a renewed comprehensive climate strategy, perhaps one that continues to build on the successful model of regional cooperation we see in RGGI.
Thank you.
[1] Today the RGGI states are led by five Republican governors and four Democrats.
[2] In general, RGGI funds are used for residential and business programs that save oil, for which there is no other source of efficiency funding (as opposed to electricity).
[3] Analysis Group. “The Economic Impacts of the Regional Greenhouse Gas Initiative on Nine Northeast and Mid-Atlantic States: Review of RGGI’s Second Three-Year Compliance Period (2012-2014)” http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/analysis_group_rggi_report_july_2015.pdf
[4] Abt Associates. “Analysis of the Public Health Impacts of the Regional Greenhouse Gas Initiative, 2009–2014.” http://abtassociates.com/RGGI
[5] Most states have already started rulemaking, but Maine is one of two states that put certain details of the RGGI program into statute.
[6] If the RGGI states were a country, it would be in the top 10 nations in economic terms, and in the top 15 for carbon emissions. What we do with RGGI matters on a global scale.
