Cap, trade, and reinvest: RGGI in Vermont
by George Twigg, Director of Public Affairs
Last week, the Regional Greenhouse Gas Initiative (RGGI) released a major report on the impact of its work as the first market-based regulatory program to reduce greenhouse gas emissions in the U.S. RGGI is a collaborative effort among a number of northeastern and mid-Atlantic states, including Vermont.
RGGI represents an important source of support for energy efficiency efforts: region-wide, the majority of RGGI revenues invested since the program began in 2008 have been invested in reducing energy consumption. Vermont has chosen to invest nearly 100% of its RGGI revenue in energy efficiency.
How RGGI works
There has long been debate about the most effective long term approaches to reducing greenhouse emissions, but after six years of revenue and reinvestment in sustainable energy efforts, it’s clear that RGGI has been effective.
Similar to the Forward Capacity Market, RGGI is organized around an auction for power generators in participating states. The basic principle is that there is an overall cap on the carbon dioxide emissions power plants are allowed to emit in any given year. Each state manages the participation of its electric generation facilities, certifying compliance with the cap, and facilitating a process to trade credits that enable some power plants to emit more than others. Following a review of the program in 2012, the cap was significantly reduced, and it is slated to continue to decrease automatically by 2.5% each year from 2015 through 2020. A lower cap drives up the price of emissions credits, effectively making it more expensive to release carbon dioxide.
Reinvesting RGGI revenues into Vermont’s energy efficiency efforts
RGGI revenues represent a very significant, if somewhat changeable, source of support for energy efficiency in Vermont. The bulk of funding for Efficiency Vermont is focused on managing electric usage, so we all can avoid the costs of building out expensive power plants and transmission lines. Revenue from RGGI gives us the flexibility to help Vermonters reduce their use of other fuels such as heating oil and propane, enabling them to reduce their heating costs. RGGI also helps us explore leading edge opportunities to help transform the ways homes are constructed, supporting projects like passive homes developed with Habitat for Humanity, which consume 80% less energy than homes built to code, and high performance manufactured homes which cost about $100,000 to construct and can have energy bills as low as $16 per month.
Are you interested in learning more about Vermont’s participation in RGGI, or reinvesting the revenues in your own home efficiency project? Let us know in the comments below.