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Christie RGGI Withdrawal Plan Slammed at Trenton Hearing

Democrats and Environmentalists Fight To Defend Clean Energy Programs

Global Warming? Not So Much

Christie killing RGGI is supremely ironic, because the roots of RGGI are in Republican, corporate and free market think tank economic theory. RGGI,  a pollutant trading scheme, is part of an ideological project. RGGI was dreamed up by these folks as an alternative to and means to reduce what was viewed as onerous government “command and control” regulation and replace it with market mechanisms under corporate control.

Yesterday, the Assembly Telecommunications and Utilities Commitee held a hearing on Governor Christie’s plan to withraw NJ from the Regional Greenhouse Gas Initiative (RGGI).

You can read a followup story by Bob Jordan, the other less critical corporate media coverage here and here and Tom Johnson’s far superior NJ Spotlight stories here and here.

The oversight hearing was followed by a press conference with leading Democrats and environmentalists joining forces to oppose Christie’s plan. Democrats announced a package of bills to over-ride the Governor’s RGGI move, including  a measure that would constitutionally dedicate revenues to Clean Energy Fund programs. The bills have not been formally introduced and are not yet publicly available. [Update: available, and will be heard on Thursday A 4108 and ACR 139]

Instead of rehashing the media coverage, I thought I’d add a few observations and implications going forward.

The Senate will hold another hearing next Monday (6/20/11) on a set of bills blocking the Gov. (S 2946 – Sweeney/Smith) and constitutionally dedicating the money . It is very likely that if the bills pass, that Christie will veto and Dems will lack votes to over-ride. However, the SCR does not require the Governor’s signature (pass both houses is sufficient to get a Constitutional question on the ballot), so it will be very interesting to see exactly what revenues this would dedicate and how this goes. 

My general sense is that this debate will catalyze activism, increase critical media coverage, and build oppositional pressure such that Christie’s Energy Master Plan changes can be stopped. If enviro’s play their cards right, the public backlash may help in other issues. Some specifics:

1. Dems see this primarily as a jobs issue and one they can use for partisan advantage and safely criticize Governor Chrisitie on.  The environmental aspects of NJ’s Clean Energy Programs are way down the list, with the exception of a few key people, like Senators Smith, Gordon, Greenstein and Buono, and Assemblyman McKeon and Chivukula. The Gorilla in the room – global warming - was barely even mentioned, nevermind considered an urgent and paramount issue.

2. Republicans see this as a tax. They went even further and tried to craft a narrative that businesses are being driven out of NJ due to high energy costs and that RGGI and Clean Energy Programs (the Societal Benefits Charge) are taxes that increase energy costs and drive businesses out of the state.  This is just another in a series of big lies.

3. The Governor’s purported justification  made 4 claims that RGGI is ineffective in terms of reducing GHG emissions and is merely a tax.

So let’s interrogate those claims, keeping in mind a basic distinction in RGGI between: 1) the cap on emissions, which determines the allowance price and impact on electric rates; and 2) the use of the revenues created by sale of allowances. These are two very different issues. (and energy bills can go down even if rates go up if less energy is used).

Christie false claim #1:

First, RGGI allowances were never expensive enough to change behavior as they were intended to and ultimately fuel different choices. When RGGI began the industry projected that the cost of allowances would eventually be as high as twenty to thirty dollars a ton compared to the current price of less than $2 per ton, at which point the cost would have been sufficient to affect a decision of energy producers to choose lower carbon fuels or more efficient production technologies. This is not the case. It has not happened. Trends indicate the cost of the allowance will continue to be at the floor reserve price and there will be no significant secondary market for allowances. In other words, the whole system is not working as it was intended to work. It’s a failure.

Facts:

RGGI was never intended to change the economic behavior of energy producers or consumers. RGGI was designed as a “modest effort” to begin to put a price on carbon and generate revenues to invest in Clean Energy Programs. The RGGI law was designed to keep the allowance price very low and minimize impacts on electric rates, the direct OPPOSITE of what Christie now claims. The RGGI law explicitly calls for a cost effective approach, mandates that the program be designed to avoid market price volatility, statutorily sets allowance costs at $2 per ton for some facilities, and includes a $7 per ton “safety valve” trigger that derails the program and serves as a cap on electric rates. When the bill was heard, expert testimony projected that the allownces were expected to sell for $2-$3 per ton. No one projected $20-$30 per ton RGGI allowance, as the Governor claims. That is just a lie. That’s one reason why I opposed the program in a series of Star Ledger columns (all made far worse by yesterday’s DEP testimony that the RGGI cap is 30% higher than current emissions). See:

Christie false claim #2

Second, New Jersey’s carbon emissions from a report the DEP will release today are already below the goals for 2020 set out in New Jersey’s Global Warming Response Act, the legislation that permitted the state to participate in RGGI. According to this most recent report which was conducted before RGGI was implemented, greenhouse gas emissions are down in New Jersey. Reduced emissions have been due to increased use of natural gas, and the decreased use of coal. We’re seeing that the market and not RGGI has created incentives to reduce the use of carbon-based fuels.

Facts: This is Christie’s “Mission Accomplished” moment. The DEP Report cited by the Governor is based on a flawed 2008 emissions inventory. RGGI did not go into effect until 2009. So it is not valid to conflate RGGI and the 2008 DEP Report, and to then use that DEP Report to imply that the market did more than RGGI in terms of emissions. Furthermore, any fuel switching from coal to natural gas has as much to do with regulation as the so called market, because energy production is a highly regulated activity and clean air regulations have significant market impacts. Regulations have been promoting natural gas for many years. In fact, as noted by Chariman Chivukula  during yesterday’s hearing, fuel switches at PSEG NJ plants went the other way - to coal. Last, fuel switching to natural gas may not have reduced emissions at all because EPA revised GHG emissions factors, making natural gas almost equivalent to coal when lifecycle impacts are considered (see: Climate Benefits of Natural Gas May Be Overstated 

Christie claim #3

Third, given that we now have laws that provide significant market incentives for wind, solar, and instate natural gas generation, any benefits that the RGGI tax may have had are miniscule. In fact fourteen laws have been passed since the Global Warming Response Act was passed authorizing us to join RGGI. These fourteen laws all accomplish the goals of promoting clean energy without the need to participate in RGGI at all. RGGI has not changed behavior and it does not reduce emissions. We’re looking for broader results that benefit all ratepayers and all citizens.

Facts: The Governor compeletly ignores the $116 million collected by the sale of RGGI allowances. That money was supposed to be invested in clean energy and consumer programs. He diverted $65 million of this money into the General Fund to pay for tax breaks for millionaires (and then has the balls to mischaracterize dedicated RGGI energy use surcharges as a “tax”). If the Governor really wanted RGGI to be effective, change behavior, and reduce emissions, he would be working to: a) lower the cap, b) expand it to other sectors (not just the electric sector), and c) mandate implementation. But he’s doing none of that, strong evidence that he wants to simply kill it, not fix it.

Christie false claim #4

Finally and importantly, RGGI does nothing more than tax electricity, tax our citizens, tax our businesses, with no discernable or measurable impact upon our environment. Because states such as Pennsylvania are not RGGI members it’s just possible that by making the cap too stringent clean New Jersey plants would be forced to close only to be replaced by power from dirty Pennsylvania coal plants. It doesn’t make any sense environmentally or economically and the continuation of this tax makes no sense for my efforts and the Lieutenant Governor’s continued efforts to make New Jersey a more business-friendly environment and a place where private sector jobs can continue to be created.

Facts: The Governor reveals his true ideological agenda here. He is more concerned with appeasing his corporate backers with a tax cut sop, than in global warming or clean energy. Christie views the so called “free market” as always superior to government intervention.  Christie killing RGGI is supremely ironic, because the roots of RGGI are in Republican, corporate and free market think tank economic theory. RGGI,  a pollutant trading scheme, is part of an ideological project. RGGI was dreamed up by these folks as an alternative to and means to reduce what was viewed as onerous government “comand and control” regulation and replace it with market mechanisms under corporate control. The Governor lies in claiming RGGI had no discernable or measurable impact on the environment – check these measured emission reduction and climate benefits of NJ clean enery programs. While these are SBC funded programs and not RGGI, we can expect similar benefits to result from the $116 million RGGI investments. The Governor’s claim that existing NJ plants would be forced to close under a strict cap is ludicrous – NJ is one of the lowest coal emissions profile and least coal reliant states in the northeast, so if NJ coal plants were forced to close that would amount to a coal shutdown in the region. It is highly unlikely that any legislature would enact a RGGI cap law that would shut down all coal power. And if they did, that would be a GOOD thing. The Governor ignores the destructive impacts that his policy to reduce energy costs will have on development of renewables – low gas prices compete with wind and solar, which are environmentally superior and produce far more jobs. The Governor has not produced one credible study that finds that NJ businesses are at a competitive disadvantage due to RGGI. Last, given how small RGGI is as a componet of energy costs, the minor role energy costs play in business competitivenss, and the thousands of clean eneergy jobs and businesses, it is ludicrous to claim that elimination of RGGI promotes a more business friendly state. 

4. Getting back to yesterday’s hearing – during the hearing, Chairman Chivukula repeatedly showed DEP’s Ray Cantor’s ignorance of basic facts, at one point mocking him:

Twenty eight cents per month [RGGI cost per household] is gong to make NJ rates competitive with Pennslvania coal? You gotta be out of your mind!

Committee Republicans Rible and Mallone and NJ BIA and Chamber of Commerce lobbysits also were called out by Chivukula, and could not provide any facts to support their claims.

I’ve been going to Trenton legislative hearings for 25 years and it is highly unusual to have the Chairman so aggressively challenge and question testimony that way Chivukula did. A big thanks for that.

This post is getting too long, so I’ll leave now with this information that is being ignored:

How do New Jersey businesses and residents benefit through the Clean Energy Program component of the SBC?

By reducing energy use and promoting renewable sources of energy generation, New Jersey’s Clean Energy Program helps reduce the need for traditionally generated electricity and the burning of natural gas, which eliminates the pollution that would have been caused by such electric generation or natural gas usage. The benefits of these programs continue for the life of the measures installed, which on average is about 15 years. Every dollar invested in the energy efficiency program returns $4.00 in savings for the residential customer and $11.00 in savings for the commercial and industrial customer.  Funds which are allocated toward energy efficiency projects and renewable energy generation in new construction and retrofits in turn help to stimulate New Jersey’s economy with additional jobs for local trade allies. New Jersey’s leading role in renewable energy initiatives provides opportunities for various businesses in the energy efficiency and renewable energy trades. Thus, through the SBC, communities and businesses receive substantial environmental and public health benefits, lower energy bills, and a stimulated economy.

From 2001 to 2010, activities and measures supported through New Jersey’s Clean Energy Program resulted in lifetime energy savings of over 29.9 million MWh of electricity, 97.3 million dekatherms of natural gas, and 18.7 million MWh of renewable generation and 2.4 MWh of distributed generation from combined heat and power systems. These measures installed are projected to reduce over 34 million metric tons of CO2 emissions – a real step toward reducing greenhouse gases.

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  1. Bill Neil
    June 14th, 2011 at 12:50 | #1

    Bill, this is excellent reporting, and helps those of us outside NJ sort out the claims for RGGI, what it has or hasn’t delivered, and the Christie confusions.

    Here’s my comment. Does anyone else see the irony in Obama’s Jobs Creation Council, headed by major American business people, calling for the training of 10,000 new engineers and scientists, when the American business community – let’s be clear, not all – but certainly its major lobbying voices at Congress – have decided to reject the overwhelming consensus of the science community about global warming, and to do not much at all besides voluntary responses?

    And here’s the personal irony; not long after I started work at NJ Audubon, back in 1989, a board member (Dick Turner) wrote an article – and I think I remember the title – “The View From the Cape” which in part was an editorial reminding environmentalists to be guided by scientific methods and conclusions rather than the emotional appeals often available to the cause(s)…and the other part I remember was that if we got ourselves in an adverserial posture with American business – well, that would be “the end game.”

    So triple irony for the folks trying to be free market friendly with cap and trade, like RGGI, weak as it is: according to the Republican Right, damn the science, cap and trade is still anti-business despite its market dressing, and you’re also anti-consumer because its an alleged disguised tax!

    My conclusion, both on global warming and the national jobs crisis (and look what happened to the business friendly Van Jones, who tried to constructively meld the two in his book the Green Collar econoomy) , is that the majority of American business leaders will truck no interference with their presumed perogatives over economics, environmental policy, and yes, even scientific conclusions themselves.

    So if citizen’s are unhappy with the state of the nation, and the climate in the summer of 2011, instead of pummeling the “captive” government, how about the proper focus on the business obtacles (and this includes mainstream economists) to solving our problems? When the New Deal and folks like Elizabeth Warren are deemed radical, beyond the pale, it’s pretty clear where the real policy extremism lies.

  2. Bill Wolfe
    June 14th, 2011 at 13:17 | #2

    @Bill Neil

    Thanks Bill. I am now reviewing the various Democratic bills – my initial take is that they are not serious adn deeply flawed. But more on that later.

    I just checked some scibble mase in my notes beofore the hearing. I jotted several bullets under :lessons of RGGI debate”. Here’s a taste, which is very simialr to your analysis, with which I compeltely agree (adn yes I recall the history, too):

    * window dressing and compromise will come back to bite you

    * to declare victory (and lose the war) are feel good measures but lous policy

    * don’t take incremetnal solutions – especailly on faith that the bureuacracty will iplement pledges that are left discretionary

    * the corporate bad gus never go away and never honor deals. Compromise in the legislation is made far worse when they start lobbying the regualtory side.

    * regulatroy sticks are needed to backstp any market scheme

    * the 1990 Clean Air Act Acid Rain Program is a sham example of RGGI. That program had regulatory teeth, mandatory 50% reductions over a mandatory 10 year period implemented via traditional facility specific regulatory permit programs that have procedural safeguards that allow some transparency and public control.

    * ideology is ingored and it matters most

    * gotta play it straight with the public

  1. June 19th, 2011 at 21:49 | #1
  2. June 21st, 2011 at 11:05 | #2
  3. July 3rd, 2011 at 00:07 | #3
  4. March 14th, 2012 at 21:26 | #4
  5. June 12th, 2015 at 19:03 | #5
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