Report chides N.J. on RGGI fund use

Jessica Perry//November 28, 2011

Report chides N.J. on RGGI fund use

Jessica Perry//November 28, 2011

Gov. Chris Christie called the Regional Greenhouse Gas Initiative a “failure” when he announced in May that New Jersey would pull out from the 10-state pollution-reduction pact. 

Gov. Chris Christie called the Regional Greenhouse Gas Initiative a “failure” when he announced in May that New Jersey would pull out from the 10-state pollution-reduction pact. 

But a report released this month finds the program had a net economic benefit to the 10 states and the region, and suggests the Garden State could have gotten more bang for its buck had Christie not used a majority of the state’s RGGI proceeds to fill the state budget gap.

Enacted three years ago, RGGI was designed to combat carbon dioxide emissions on a regional level by requiring power plants to purchase pollution allowances. The proceeds from those allowances — about $912 million in total — were divvied up among the states, which stretch from Maryland along the Atlantic Coast to Maine.

The study, commissioned by the National Association of Regulatory Utility Commissioners and conducted by the Boston-based consulting firm Analysis Group, found that the first three years of the program will add $1.6 billion in economic value to the region, as well as 16,000 jobs. New Jersey received $118 million in pollution allowance proceeds, according to the study, which will result in $151 million in economic growth, as well as 1,772 new jobs.

“The states took a lot of care to figure out how to make sure the program benefited both the environment and the economy,” said Matt Eliott, global warming and green energy advocate at Environment New Jersey. “This just confirmed that the program was working, and it was working just as anticipated.”

What was not anticipated, however, was the economic downturn and attendant state budget shortfalls.

Last year, Christie took $65 million in RGGI funds to help close New Jersey’s budget gap. All told, $75 million of the $118 million in RGGI proceeds New Jersey received since 2008 went toward the state’s general fund, which made New Jersey an outlier — only four states put RGGI dollars into their general funds, and none put as high a percentage as New Jersey.

New Jersey didn’t put any of its money toward energy-efficiency programs, which the study said provided the highest return on investment.
Paul Hibbard, a vice president at Analysis Group and a former Massachusetts utility regulator, said energy-efficiency measures work well because they affect both demand and price.
“One (benefit) is to depress the overall level of consumption, which lowers costs — but also, by depressing demand, you’re lowering the actual price of the electricity,” he said.

Massachusetts put 94 percent of its RGGI revenue toward energy-efficiency programs, and had the highest net economic benefit, $498 million, according to the report.
State Sen. Bob Smith (D-Piscataway) said the Legislature had planned specific uses for the $65 million in RGGI funds Christie took, like putting solar arrays on warehouse roofs and helping municipalities make energy-efficiency upgrades.

Smith, who chairs the state Senate’s environment and energy committee, said it’s clear RGGI had an economic benefit, but “we never got a chance” to judge its full environmental impact.

Larry Hajna, a spokesman for the state Department of Environmental Protection, said the state did its own analysis of RGGI’s economic impact, which showed that the program would add .01 percent to the state’s future growth. He said the DEP has not done an in-depth analysis of Analysis Group’s report, but said the results were not significantly different than the state’s analysis.

Hajna said RGGI had become unwieldy, and is not the best solution for the state.
“We’re really focused on things, on actions, that have a real edge to them, things that people can understand, can put their arms around and that will really work,” he said.

Hajna said the state is working to lower greenhouse gas emissions in a number of ways, including initiatives to support solar and wind energy, and new technologies like electric vehicles. He said New Jersey also has taken the lead in a lawsuit to force three Pennsylvania power plants to install pollution-control equipment.

Pennsylvania’s non-membership in RGGI undermines the entire program, said Michael Egenton, senior vice president at the New Jersey State Chamber of Commerce.

“Pennsylvania was only a neutral observer,” he said. “We always had an issue with that, because a lot of our air-emission issues come from out west, Pennsylvania and Ohio.”
Asked if it’s unfair to judge the program given Christie’s decision to remove RGGI funds, Egenton said Christie was right to prioritize balancing the state budget.

Smith conceded it might have been necessary to use some RGGI funds, but, he said, “I would have done a bit of a balancing act. … I would have kept a portion of it out and used it for the purpose intended to actually have some sort of proving ground.”

Regardless, Smith said there’s likely little the Legislature could do to stop Christie’s planned exit from RGGI, aside from “some regulatory things that might slow him down.”
Hajna said the state is still on track to officially withdraw from RGGI at year’s end. All that’s left, he said, are “some procedural formalities.”

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