New Jersey’s new governor signed an executive order yesterday directing his acting Department of Environmental Protection commissioner, Catherine McCabe, and Board of Public Utilities President Joseph Fiordaliso to begin negotiations with current state members of the Regional Greenhouse Gas Initiative (RGGI) to re-enter the program. This order reverses former Governor Chris Christie’s 2011 action to withdraw New Jersey from the program.
RGGI, established almost 10 years ago in 2009, is the first mandatory market-based program in the United States to reduce greenhouse gas emissions. At Governor Murphy’s direction, New Jersey will rejoin the cooperative effort among fellow northeastern states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce carbon dioxide (CO2) emissions from the power sector.
What does that mean? From the 30,000 foot view, it means fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater would be required to hold allowances equal to their CO2 emissions over a three-year control period. The power plants can use allowances issued by any of the participating states, and can buy them at regional auctions or in secondary markets. The regional cap on total CO2 emissions ratchets down 2.5% each year until 2020, theoretically relying on the regional market to drive prices and efficiencies. Proceeds from the auctions are used to fund renewable energy and energy efficiency projects.
In the weeds, it means the Department of Environmental Protection drafting new regulations (presumably using RGGI’s Model Rules), participation in a complex and well-developed compliance and tracking system as well as the auctions and secondary markets, passing along costs and savings to consumers, periodic reviews and adjustments, entering cooperative memorandums, and more. It may also mean more opportunities to promote solar, wind, and other renewable projects.
Overall, RGGI has been seen as a success, reportedly reducing power sector carbon emissions as much as 40% since 2005, while member state economies continued to grow. There are, however, many ways to interpret the different data and forecast future impacts. Nonetheless, New Jersey is on the path back to RGGI and we will be on the lookout for the implications, costs, and opportunities. We are also keeping an eye on state legislation directing New Jersey to join the U.S. Climate Alliance, which Governor Murphy is expected to approve if it hits his desk. The governor may also bypass the legislature and use the executive order route. The U.S. Climate Alliance doesn’t come along with the same compliance commitments as RGGI, but it is another example of ramped up state- and regional-level actions to address climate change in reaction to the reduction in federal action. The U.S. Climate Alliance was formed in direct response to President Trump’s withdrawal of the United States from the Paris Climate Accord.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.
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