REGIONAL GREENHOUSE GAS INITIATIVE
KEEA ISSUE BRIEF
OVERVIEW: REGIONAL GREENHOUSE GAS INITIATIVE
On October 3, 2019, Governor Wolf issued an Executive Order directing the Department of Environmental Protection (DEP) to develop a carbon budget trading program that would allow Pennsylvania to join with the Regional Greenhouse Gas Initiative, a multi-state compact of Northeastern and Mid-Atlantic states to reduce carbon pollution.[i]
States that participate in RGGI require power plants to purchase allowances in order to emit carbon pollution. This mechanism generates proceeds that are then reinvested into the state’s economy, usually through programs that support energy efficiency, clean energy, and greenhouse gas reduction. RGGI states have invested over half of all proceeds into energy efficiency programs over the lifetime of the compact.[ii] It is through this investment of proceeds that RGGI makes a bold impact on energy efficiency, clean energy, and statewide economic development.
The Analysis Group estimates that RGGI delivered 4 billion in net economic benefits over its first decade.[iii] These economic benefits came in the form of direct benefits from job creation and bill savings as a result of energy efficiency investments, but also and indirect effects from new demand for local goods, services and jobs that result from that investment.
HOW RGGI CAN DRIVE INVESTMENT IN ENERGY EFFICIENCY
In Pennsylvania, the DEP estimates RGGI will generate $300 million in proceeds. Over the last decade, the nine participating states have invested roughly 55% of RGGI proceeds into energy efficiency programs.[i]
RGGI investments complement existing policies, including electric utility energy efficiency standards like Act 129. Act 129 drives investment in measures that help reduce electricity use and has reduced carbon pollution by 7 million tons in its first seven years. Utilities meet Act 129 targets by contracting with third parties to implement energy efficiency programs, including high-efficiency appliance and lighting rebates, building retrofits, and more efficient industrial equipment.[ii] Energy efficiency programs also create good-paying local jobs: in 2019, energy efficiency accounted for over 71,000 Pennsylvania jobs.[iii]
Beyond supplementing energy efficiency programs, RGGI proceeds can be invested more broadly. Since 80 percent of Pennsylvanians get their heating fuel from a source other than electricity — such as gas or fuel oil — the state would benefit from incentives for insulation, efficient heat pumps, and other technologies that reduce gas and oil consumption. RGGI could even drive more comprehensive measures that improve the entire performance of the whole building, making it safer, healthier, and more comfortable as well as more energy efficient.
ENERGY EFFICIENCY INVESTMENTS WILL CREATE THOUSANDS OF JOBS TO HELP RECOVER FROM COVID-19
Like many other industries, energy efficiency businesses that work with homes and small businesses have suffered significantly from the impacts of COVID-19. In March and April alone, Pennsylvania lost 16,000 energy efficiency jobs.
While we hope that many of these jobs will return as stay-at-home and stop-work orders are lifted, the energy efficiency industry urgently needs investment to get back to full capacity and continue to be a job-creating engine for the state. The American Council for an Energy Efficient Economy study found that removing limits on utility investment into energy efficiency under Act 129 could create 30,000 jobs; an investment of RGGI proceeds would have similar impact.
ENERGY EFFICIENCY INVESTMENTS WILL CREATE ENERGY SAVINGS FOR PENNSYLVANIA HOUSEHOLDS AND BUSINESSES
Additional energy efficiency investments with revenues generated by RGGI or through existing mechanisms such as Act 129 would significantly reduce the cost of RGGI for electric customers.[i]
According to the Public Utility Commission, energy efficiency programs implemented from 2019 – 2016 delivered $6.4 billion in benefits to Pennsylvania electric customers.[ii] Every dollar invested through Act 129 has generated $1.70 in benefits for customers. Energy savings multiply throughout communities: families with lower utility bills can spend more on local goods and services, and businesses that spend less on energy can spend more on payroll or capital investment. In this way, energy efficiency investments are a win-win-win that will ensure that the Regional Greenhouse Gas initiative delivers not only less pollution, but more jobs, more savings, and a stronger economy for Pennsylvania.
[i] Executive Order 2019-07 Commonwealth Leadership in Addressing Climate Change through Electric Sector Emissions Reductions, available at https://www.governor.pa.gov/newsroom/executive-order-2019-07-commonwealth-leadership-in-addressing-climate-change-through-electric-sector-emissions-reductions/
[ii] RGGI, Inc, “Investment of Proceeds in 2016,” available at https://www.rggi.org/sites/default/files/Uploads/Proceeds/RGGI_Proceeds_Report_2016.pdf
[iii] Analysis Group, “The Economic Impacts of the Regional Greenhouse Gas Initative on Nine Northeastern and Mid-Atlantic States: Review of RGGI’s Third Three-Year Compliance Period,” April 2018, available at https://www.analysisgroup.com/Insights/publishing/the-economic-impacts-of-the-regional-greenhouse-gas-initiative-on-nine-northeast-and-mid-atlantic-states–review-of-rggis-third-three-year-compliance-period-2015-2017/
[ii] Calculations by KEEA based on data from the Pennsylvania Public Utility Commission Statewide Evaluator, Phase I and II Final Reports, available at http://www.puc.pa.gov/filing_resources/issues_laws_regulations/act_129_information/act_129_statewide_evaluator_swe_.aspx
[iii] Clean Jobs Pennsylvania 2019, E2, available at https://www.e2.org/reports/clean-jobs-pennsylvania-2019/
[i] NRDC, Pennsylvania Needs PA Needs CO2 Limits—and Strong Renewables Policy, Too,” available at https://www.nrdc.org/experts/mark-szybist/pa-needs-renewable-energy-goals-well-carbon-limits