New Data Show States that Limit Carbon Emissions through Markets Are Seeing Economic Benefits 

States evaluating EPA Clean Power Plan options can learn from the Regional Greenhouse Gas Initiative

Date:July 14, 2015
Contact:Cortney Piper
865-789-2669

New York -- States participating in the Regional Greenhouse Gas Initiative (RGGI) have found that regulating carbon emissions from power plants through market-based mechanisms goes hand-in-hand with economic benefits. That's the conclusion of a new report from Analysis Group, released today at the National Association of Regulatory Utility Commissioners (NARUC) conference in New York, NY. The report findings provide valuable lessons for states across the country now evaluating their options under the Clean Power Plan, the EPA's proposed effort to limit carbon emissions from power plants across the country.

"Based on an analysis of years of hard data, RGGI shows that multi-state, market-based carbon control mechanisms work and can deliver positive economic benefits," said Analysis Group Vice President Paul Hibbard. "That's not to say programs designed to cut greenhouse gas emissions are economic development programs -- their goals are different. But the data clearly show that cutting carbon emissions can be a net positive for the economy." 

The report, "The Economic Impacts of the Regional Greenhouse Gas Initiative on Nine Northeast and Mid-Atlantic States," found that implementing RGGI from 2012-2014 adds $1.3 billion in economic value to the nine-state RGGI region, leads to the creation of more than 14,000 new jobs, and cuts electricity and heating bills, saving consumers $460 million. Each individual state sees economic benefits as the region cuts annual carbon emissions by more than a third from 2008 (133 million tons) to 2014 (86 million tons).

Under RGGI, six New England states plus New York, Delaware, and Maryland establish a regional cap for carbon emissions. States then create their own, individual plans to cut carbon and offer a declining number of carbon emission allowances for sale through regional auctions. Power plant owners buy those allowances at auction -- which gives them the right to emit specific amounts of carbon dioxide -- or find ways to clean up carbon emissions. Auction proceeds go back to the states, which have reinvested billions of dollars back into their economies.

Each state decides how to spend that money. The report examined individual state strategies to invest that revenue, including funding energy efficiency programs, building community-based renewable power projects, helping low-income customers pay their electricity bills, putting greenhouse-gas reduction measures in place, educating consumers, and offering training for clean-energy jobs.

"RGGI is a job creator. Investments made during the last three years will lead to 14,200 new jobs," said Analysis Group Senior Advisor Susan Tierney. "And while electric rates can increase as power plants recover compliance costs, total electric bills have gone down, thanks largely to the states' investment in energy efficiency increases. Over time, the past three years of RGGI's operations helps families, businesses, and institutions save $460 million on electricity bills." 

The report also found that RGGI has helped keep more dollars circulating in the local economy, as the amount of money sent outside the region to pay for imported energy has dropped. RGGI reduced dollars flowing out of state to pay for fossil fuels imported from outside the region by more than $1.27 billion, from 2012-2014. Meanwhile, the states' use of RGGI auction proceeds has boosted the purchase of goods and services in the regional economy for everything from solar panels and insulation to engineering services for energy audits to labor for efficiency retrofits. 

The report was released at a meeting of the National Association of Regulatory Utility Commissioners, which, along with state environmental commissioners, will be on the front lines as the EPA's plans to regulate carbon emissions from power plants play out. The report is a second one prepared by the Analysis Group team; the prior analysis focused on the economic impacts of RGGI's first three years (2009-2011).

"We hope regulators across the country -- along with policy makers, utilities, and other stakeholders -- are able to draw useful lessons from this report, as they evaluate Clean Power Plan options in their individual states," Vice President Andrea Okie said.

"This report provides strong evidence of the value of market-based mechanisms to address carbon emissions from power plants," added Manager Pavel Darling.

Read the full report

Read the executive summary

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About Analysis Group

Since 1981, Analysis Group has provided expertise in economics, finance, health care analytics, and strategy to top law firms, Fortune 500 companies, global health care corporations, and government agencies. Our work is grounded in a collaborative approach that allows us to integrate the best ideas of leading academic and industry experts and our more than 600 professionals. As a result, our clients receive thoughtful, pragmatic solutions to their most challenging business and litigation problems. Through our work in thousands of cases across multiple industries we have become one of the largest economic consulting firms in North America, with 11 offices in the United States, Canada, and China.

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