Tom Borelli

While the prospects for passing a federal cap-and-trade law in the Senate are dwindling, this economically-damaging energy policy is alive and well in the states.

Ten northeastern states are currently implementing a regional cap-and-trade system known as the Regional Greenhouse Gas Initiative (RGGI). Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont are mandating that utilities reduce their carbon dioxide emissions 10 percent by 2018.

Examination of the RGGI experience unmasks cap-and-trade as a con game from progressive governors to transfer taxpayer money to bloated state coffers and to special interest groups. Initiated in 2003 when then-Governor George Pataki (R-NY) sent a letter to regional governors calling for states “to develop a strategy that will help the region lead the nation in the effort to fight global climate change,” RGGI became the first program in the nation to use cap-and-trade to reduce greenhouse gases.

Under RGGI, participating states require utilities to purchase a permit or an allowance for each ton of carbon dioxide the power plant emits. Utilities buy carbon dioxide allowances in an auction and the revenue from the sale goes to the state. If a utility’s emissions exceed its allowance, the power plant must purchase additional carbon permits or it can sell its excess allowances. From 2009 to 2014, emissions are capped at 188 million tons annually. In 2015, the amount of allowance available for auction is reduced 2.5 percent for the next four years to meet the 10 percent reduction emission target.

Not surprisingly, the states’ proclaimed intention to use the revenue “to invest proceeds in consumer benefit programs to build a clean energy economy” have gone off-track.

Despite the claims by governors that RGGI combats climate change and spurs investment in renewable energy, this cap-and-trade scheme is an energy tax with the revenue being used to plug budget gaps.

In New Jersey, Governor Chris Christie moved $65 million that the state generated from its carbon dioxide auction to New Jersey’s general fund and New York Governor David Paterson took $90 million from RGGI auctions to help fill a gap in his state’s budget.

Maryland and New Hampshire also have raided the states’ “climate change lock box,” which supposedly holds the emissions revenue for other matters. According to Stateline.org, “New Hampshire lawmakers voted to take all of the state's expected $3.1 million share of the proceeds and use it to help plug a $295 million budget hole,” and Maryland lawmakers agreed “… to divert RGGI money from energy-efficiency programs toward helping low-income residents with their power bills.”


Tom Borelli

Tom Borelli, Ph.D., is a Senior Fellow with FreedomWorks.

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