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  • Jackson Morris, Natural Resources Defense Council

Proof in the Climate Pudding: Mass-Based Plans Help States Cut Carbon Pollution and Grow Economies

This blog post was co-authored with my colleague Kevin Steinberger.

As we count down the days until the release of the EPA's final carbon pollution standards for power plants, states weighing their compliance options should be heartened by more good news released today: so-called multi-state, mass-based approaches to cutting carbon emissions can bring significant economic benefits. (A mass-based approach is one in which a state or group of states establishes a declining cap on carbon emissions, and requires power plants to hold one carbon allowance for every ton of carbon they emit.) A new report out from the Analysis Group finds that the mass-based approach underway since 2009 in nine Northeast and Mid-Atlantic states, the Regional Greenhouse Gas Initiative (RGGI), has delivered significant reductions in emissions, helping to cost-effectively cut power-plant carbon pollution by approximately one-third between 2008 and 2014. All the while, this mass-based program has created a slew of economic benefits for participating states--adding tens of thousands of job-years to the region (a job-year is just what it sounds like--one year of full-time employment for one person), saving consumers hundreds of millions of dollars on their energy bills, with significantly more savings to come, and, generating economic growth totaling nearly $3 billion in the region over the last six years. At the same time, the program has improved grid reliability and energy affordability by decreasing overall demand through end-use energy efficiency, and kept billions of local energy dollars in-state and in the region by investing in energy efficiency, renewable energy, ratepayer assistance, and training local workers for jobs in the thriving clean energy sector.

The proof is in the (mango) pudding: Mass-based programs for cutting carbon from power plants that use energy efficiency and renewable energy have a demonstrated track record of success. One program in nine Northeastern and Mid-Atlantic states has slashed greenhouse gas emissions while it's created tens of thousands of jobs, saved consumers money on their energy bills and increased economic growth, says a new report out by the Analysis Group. (photo credit: Daniel Go)

The Analysis Group report is hardly the only one that finds states have a lot to gain by participating in multi-state, mass-based carbon-cutting programs. But this white paper is unique in that its conclusions aren't based on modeling. Instead, real-world experience and data from the nation's first multi-state carbon market confirms that regional emissions trading programs can indeed successfully cut pollution and simultaneously generate net economic benefits. The study "focuses on the actual observable flow of payments and economic activity," the authors write. These observable flows include "known CO2 allowance prices; observable CO2 auction results; dollars distributed from the auction to the RGGI states; actual state-government decisions about how to spend the allowance proceeds; measurable reductions in energy use from energy efficiency programs funded by RGGI dollars; traceable impacts of such expenditures on prices within the power sector; and concrete value added to the economy."

Today's report focuses on the program's impacts between January 2012 and December 2014. (It builds on an earlier one, released in 2011, which examined the program's first three years.) By auctioning off carbon allowances to power-plant owners at quarterly, regional events (rather than giving away those allowances to power-plant owners for free--that scenario would have padded polluters' pockets and driven up compliance costs rather than spurring the marked economic benefits identified in this report), and by then investing those proceeds in energy efficiency, renewable energy, ratepayer assistance, and job-training for clean energy jobs, between 2012 and 2014, the nine states involved have:

• generated $1.3 billion in economic value, with "direct and indirect multiplier effects locally and regionally." That's $31 of economic value per person in the region.

• and, cut consumer energy bills by a total of $460 million: $340 million on electricity and $120 million on natural gas and heating oil. While wholesale electricity prices have increased slightly, the report explains, "overall electricity bills go down...." (Italics added). That's thanks to investments "in energy-efficiency programs that reduce overall electricity consumption, and in renewable energy programs that displace higher-priced electricity generation resources...."

The program has also:

• created more than 14,000 job-years, with jobs "located around the economy." (Examples include "engineers who perform efficiency audits; workers who install energy efficiency measures in commercial buildings; or staff performing teacher training on energy issues.")

• and, distributed benefits across customer classes. "States have demonstrated the ability to not only use allowance proceeds in ways that advance state policy objectives, but to do so with an eye towards fair distribution of reinvestment benefits across all customers."

For states, figuring out compliance options under the EPA's Clean Power Plan can sometimes seem like a daunting task. Luckily, many states are already rolling up their sleeves and exploring ways to capture the benefits presented by interstate approaches. Today's Analysis Group report should further assure them that multi-state, mass-based approaches have a lot to offer, especial

ly those programs that involve tradable carbon allowances and the wise investment of allowance proceeds for consumer benefit. Such an approach, pioneered by nine Northeast and Mid-Atlantic states, can bring as many benefits to state and regional economies as they will to our climate overall.

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