Drs. Ralph and Amy Pratt consider themselves environmentally conscious business owners.
As veterinarians, and owners of the West Greenwich Animal Hospital, the husband and wife think seriously about climate change.
“We both started out in college studying biology and zoology, automatically giving us that scientific understanding of global warming created by fossil-fuel burning,” Ralph Pratt said. “That’s tempered, however, by the understanding that you can’t just throw a lot of money at a problem and save the world. It’s got to be sustainable on the business end.”
The balanced approach led the couple in 2014 to purchase a rooftop solar array costing about $40,000. The Pratts received federal tax credits and about $12,000 from the Renewable Energy Fund, a state-administered program. The project is on track to be paid off in six years.
“After it pays itself off, you figure a few hundred dollars a month in savings for another 15 years or so,” Pratt said. That’s $54,000 over a decade and a half.
Small-business owners such as the Pratts will continue to benefit from the Renewable Energy Fund, thanks in part to a recent $3 million boost in funding from the Regional Greenhouse Gas Initiative.
RGGI is a market-based, cap-and-trade accord among nine New England and mid-Atlantic states that’s seen its national profile grow in recent months amid partisan squabbles over climate change.
The accord allows emission allowances to be bought and sold at auctions, which raises money for states and is designed to reduce carbon-dioxide emissions, or greenhouse gasses. The state has received $57.6 million through RGGI since 2008.
“It has been a very successful program in showing that you can have this type of cap-and-trade system,” said Dan Dolan, president of the New England Power Generators Association Inc., a Boston-based trade group that represents most of the six participating Rhode Island power plants. “It’s also created a substantial revenue source for individual states to reinvest in other energy ventures.”
As a funding source, the program has quietly worked well in Rhode Island for about a decade. But it has failed to play a significant role in delivering on one of its key promises: reducing greenhouse gasses.
“What we haven’t seen from RGGI is a material impact on actual emissions,” Dolan said, noting that his members have independently played a major role in driving down emissions by becoming cleaner and more efficient.
The efficacy of RGGI, the only multistate program of its kind, is an especially important question in Rhode Island, which has set a lofty goal of cutting carbon emissions by 80 percent of 1990 levels by 2050. The state is currently on pace to reach that goal by year 2208, according to an analysis by Providence Business News, meaning that if the state is serious about such goals, it needs to take a much more aggressive approach.
Can RGGI be part of the solution? Or are critics right that, absent tougher, mandated standards, market forces unrelated to environmental goals are the leading factors in determining carbon emissions?
RGGI has received renewed attention in the wake of President Donald Trump’s recent announcement the United States would leave the Paris climate accord, a multinational agreement to mitigate global greenhouse gas emissions through voluntary reductions.
“The Paris climate accord is simply the latest example of Washington entering into an agreement that disadvantages the United States to the exclusive benefit of other countries,” Trump said at the White House on June 1.
The president’s decision evoked outrage from global leaders, along with U.S. proponents of reducing carbon emissions. Disconcerted environmentalists scrambled to find new ways to continue mitigating efforts, and RGGI is seen by some as a symbol of that effort, despite its questionable record in driving down emissions.
IN IT TOGETHER Nine Northeastern states are part of the Regional Greenhouse Gas Initiative. Along with Rhode Island, those states are: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York and Vermont.
“RGGI is especially important … to tell the world that despite the president’s unwise withdrawal of the United States from the Paris agreement, it’s not [representative of] all Americans,” said Michael B. Gerrard, law professor at Columbia Law School, who spoke at a June 27 review and evaluation meeting among RGGI participants – including Rhode Island.
Through the review process, which started before Trump’s decision to leave the global accord, RGGI stakeholders are trying to figure out what to do next with the multistate agreement. Because of the federal pullback, state and regional policies – such as RGGI – could help fill the leadership vacuum among proponents of curbing global emissions.
But there are many stakeholders across member states, including in the private sector.
“The world is watching,” Gerrard noted. “No pressure.”
BORN FROM POLITICS
The idea that a regional agreement such as RGGI even exists seems almost quaint by today’s partisan national political standards.
“It came from a bipartisan time,” said Janet L. Coit, director of the R.I. Department of Environmental Management.
Coit and Marion Gold, commissioner at the R.I. Public Utilities Commission, represent Rhode Island’s interests with RGGI Inc., a nonprofit entity created to administer and oversee the multistate initiative.
“RGGI stands out as being even more important today because it’s a group, from Maine to Maryland, with governors of different political parties,” Coit added.
The initiative was officially formed in 2005 after then-New York Gov. George E. Pataki, a Republican, invited fellow Northeastern governors to consider the idea, a response to concerns President George W. Bush’s administration wasn’t doing enough to combat the rising level of carbon emissions in the country.
The initiative took hold during the 2008 presidential election, a year after Rhode Island officially joined, as it was held up as a possible precursor to a national system. The idea for such a model was promoted by both major party nominees for president that year, Democrat Barack Obama and U.S. Sen. John McCain, a Republican.
“There was not as much of a political divide on the science” at the time, Coit said.
U.S. legislation, however, failed to materialize. The issue of climate change – and carbon emissions – has since become politically weaponized. Trump has repeatedly criticized any efforts to mandate curbs on carbon emissions, throwing much of his political support behind trying to bolster the declining coal industry instead.
“Today, to our great shock, we find ourselves with a president who believes that regulations of all kinds are nothing but job killers, that they are all costs and no benefits, and, as so, many should be eliminated,” Gerrard lamented.
The primary criticism of RGGI – especially in New England states – is that it isn’t tough enough on carbon emissions.
At the same time, electricity generators, who pay for the legal right to emit carbon, feel like their industry is unfairly singled out, as other sectors, including transportation and heating, are equally contributing to emissions.
“It’s not sufficient to just focus on generators,” Dolan said. “We need an economywide, meaningful price on carbon.”
RGGI caps the amount of emissions electricity generators can emit each year. Those emissions are bought and sold based on allowances. Power plants that emit more in any given year can buy more allowances. Power plants that emit less, need fewer allowances. And because it’s a market-based program, brokers and investors can also buy and sell.
The market transactions work relatively well. The carbon cutting, not so much.
“In part, [that’s] because the price of the allowances has been so low, and the overall administrative cap has been relatively high,” Dolan said.
In 2013, Rhode Island carbon allowances – the amount of carbon power plants could produce – totaled 2.8 million metric tons of carbon, according to the most recent state data available.
At the same time, actual power-plant carbon emissions totaled just 2.6 million metric tons. The trend was constant each year the DEM released data between 2010 and 2013, and it’s similar for all RGGI states combined, according to a 2017 study by the Congressional Research Service, a nonpartisan research arm of Congress.
To eliminate the gap, RGGI stakeholders in 2014 revised the emissions cap downward. But because allowances purchased during the time of the higher cap could be “banked” and applied later, power plants can exceed the new cap level, at least until those allowances from past years expire.
The net result is that RGGI has had little impact on regional, national and global emissions.
“From a practical standpoint, the RGGI program’s contribution to directly reducing the global accumulation of [greenhouse gas] emissions in the atmosphere is arguably negligible,” according to CRS.
So how can it help Rhode Island reach its lofty 2050 carbon-cutting goal of an 80 percent reduction from 1990 levels?
In 2013, total emissions in the Ocean State came to 11.9 million metric tons, representing a 2.6 percent decline from 2010, the first year state officials started keeping track.
The 2013 level, however, still represents an 11.1 percent increase from 1990 emission levels, the state’s baseline.
At its current pace of decline over three years, compounded at 0.87 percent per year, Rhode Island carbon emissions wouldn’t return to 1990 levels until 2025, and an 80 percent reduction wouldn’t happen until 2208.
“What’s often missing from these utopian energy plans is any real cost-benefit analysis, and anytime we see one, it’s clear the costs to the community, families and businesses far outweigh any real or perceived benefit,” said Mike Stenhouse, founder and CEO of the Rhode Island Center for Freedom and Prosperity, a public-policy think tank advocating free-market policies.
“How can this be worth the extra tax?” he asked, rhetorically.
Rhode Island officials, however, argue that while the RGGI cap may not be actively driving down emissions by itself, the money it produces for states is helping the cause.
“Is RGGI primarily what’s causing the reduction [from 2010 levels]? I would say, ‘No,’ ” said Laurie Grandchamp, acting chief of R.I. Office of Air Resources, a DEM division. “But there are many factors that need to be taken into consideration, and I wouldn’t say there is one factor. It’s all the factors combined, including RGGI.”
CRS largely agrees.
“Although the cap likely had limited direct impact on the region’s power-plant emissions, the revenue generated from the emission-allowances sales likely had some impact on emission levels in the region,” according to the study.
LOVIN’ THE MONEY
Even if you haven’t heard of an RGGI-funded project, you’ve probably seen one.
From making homes and businesses more energy efficient, to funding small-scale, renewable-energy projects, RGGI proceeds are earmarked to fund projects that benefit energy consumers through cost-effective projects.
“It’s given us a tool to actually help the greenhouse gas reduction,” said Carol Grant, commissioner of the R.I. Office of Energy Resources.
Grant’s office is responsible for deciding how each tranche of RGGI money should be spent.
The most recent allocation went predominately toward the Renewable Energy Fund, administered by R.I. Commerce Corp., designed to help individuals and business owners – such as the Pratts – set up renewable-energy projects.
“With the renewable-energy fund, and the federal incentives, it was doable,” Pratt said of his project. (President Trump’s proposed budget would not impact current federal renewable-energy tax credits or subsidies.)
Putting money toward renewable-energy projects also aligns with Gov. Gina M. Raimondo’s personal agenda. In March, she called for the state to be buying 1,000 megawatts of electricity from renewable-energy sources by 2020.
“It’s a good moment for us to put RGGI money toward that momentum,” Grant said.
Nearly another $1 million of RGGI funds recently went toward seven municipalities – including Providence – to install LED streetlights and fixtures, resulting in less-expensive electricity bills, ultimately saving taxpayers money. The 16,875 streetlight conversions in Providence were estimated to save the city $3 million each year, according to Mayor Jorge O. Elorza.
RGGI money in Rhode Island must go toward such projects, according to state law.
Those lines were blurred this year, however, when the General Assembly decided to move $12.5 million from a $123 million energy-efficiency fund – called the System Reliability and Energy Efficiency and Conservation Procurement Program – to the General Fund.
The energy-efficiency fund has received about $26.5 million in RGGI money since the start of the program, including more than $2 million last fiscal year.
Rhode Island lawmakers rationalized the transfer – known colloquially as a “scoop” – saying it is necessary to balance the state’s $9.2 billion fiscal 2018 budget, which still hadn’t passed the General Assembly by late July due to an unrelated political dispute among state leaders.
When asked whether there was any conflict with the law governing RGGI money, the state released the following statement:
“The statutes governing RGGI and the [energy-efficiency fund] are two separate and distinct laws.”
Stenhouse sees it differently.
‘What’s often missing from these utopian energy plans is any real cost-benefit analysis.’
MIKE STENHOUSE, Rhode Island Center for Freedom and Prosperity founder and CEO
“It’s a dishonest gimmick,” he said. “It’s dishonest to take restricted funds and put them into the general account.”
Grant said she’s confident state lawmakers are not actively trying to weaken energy-efficiency efforts.
Grant also said it would help if RGGI proceeds would grow again. The state in June received about $683,712 through the quarterly auctions, representing an 81.8 percent reduction from its peak receipt of $3.8 million in September 2015.
How those dollar amounts and the carbon-emission levels will change, however, has a lot to do with the current review and evaluation process that’s supposed to shape the initiative for the decade beginning in 2020.
California in 2006 launched its own cap-and-trade system, impacting one of the globe’s largest economies. Gov. Jerry Brown on July 25 signed legislation to extend the program until 2030. It was set to expire in 2020. The goal is to cut emissions more than 40 percent below 1990 levels by 2030. The goal is undoubtedly lofty, but the state does benefit from only having to deal with intrastate politics, unlike RGGI.
RGGI stakeholders – including Rhode Island – are considering three different options for reducing the emission cap. Environmental groups, including the Natural Resources Defense Council, are advocating for the most stringent proposal, a 3 percent reduction per year, following a one-time 6.5 percent reduction in 2019. The New York-based nonprofit estimates RGGI states would gain $3 billion in extra funding through 2030 under the plan they support. Rhode Island, specifically, would receive an estimated $3.9 million more per year, according to the NRDC.
Gold and Coit are measured when talking about the RGGI review and evaluation process.
“It’s delicate,” Gold said pointedly. “Rhode Island has very ambitious and aggressive climate goals, but we want to come up with a program that representatives from Maine to Maryland can take back to their governors.”
The cautious approach makes sense, as state goals are different. Maryland, for instance, last year passed a law to reduce total emissions to 40 percent below 2006 levels by 2030. Maine, meanwhile, is looking for a 10 percent reduction from 1990 levels by 2020, and 75-80 percent reduction from 2003 levels in the “long term.” State law does not specify a target year, according to Lisa J. Smith, senior planner at the Maine Energy Office.
The disparate goals within RGGI states shed light on why consensus – whether it be subjectively too aggressive, or too soft – is difficult to reach.
The member states are meeting throughout the summer to come up with some sort of a new plan. The global debate surrounding carbon has raised the stakes, according to Gold.
“One of the things I’m seeing is that it has galvanized state and local leadership,” she said, pointing to Raimondo’s decision on June 12 to sign an executive order that reaffirmed Rhode Island’s commitment to the Paris climate accord.
States, cities and towns throughout the country made similar commitments.
But if RGGI, which has produced $2.7 billion for participating states since 2008, is truly to become a model that reduces emissions at a level that exceeds “negligible,” there is a need for transformation.
Renewable-energy advocates are calling on RGGI to step up its efforts, saying the current model is falling short.
“The Trump administration is turning the federal government’s back on the historic opportunity to build a clean-energy future that reduces climate pollution,” said Daniel Sosland, president of Acadia Center, a regional advocate of so-called clean energy with offices in Providence. “Acadia Center is calling on RGGI states, in particular, to respond by redoubling their commitments to a program that has already shown the potential a clean-energy future holds.”
Generator advocates, however, are calling for a measured approach, especially since moving too quickly could result in spiking costs and making the region even less competitive when it comes to energy costs.
New England is home to some of the highest energy costs in the country.
Dolan, whose trade group represents five of the six Rhode Island power plants participating in RGGI, along with 85 percent of all the generating capacity throughout New England, is skeptical RGGI – by itself – is the answer.
“I give RGGI credit for trying to figure out ways to go along this route,” he said. “But for folks who are expecting any one of these policies to be the silver bullet – it’s simply not going to work.”
Dolan’s sentiment is echoed by state energy and environmental leaders, who say there needs to be focus given to other carbon-emitting industries, especially transportation and heating. Indeed, while electric power-generation emissions fell in Rhode Island between 2010 and 2013, thermal emissions remained relatively level and transportation emissions grew 6 percent.
“There was this concept at the beginning of, ‘Let’s start with electricity and broaden out,’ ” Dolan said. “Ultimately, I think that’s where this is all going to have to go.”
Whether RGGI is a strong-enough policy to expand to new states, or other industries, is anyone’s guess. But if Rhode Island – and some of its neighboring states – is serious about meeting its own emission-cutting goals, the clock is ticking.
“We have to use all the different tools that we have in order to reduce emissions,” said Grandchamp. “I don’t think there’s one answer.”
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.