REGULATION

RGGI may not be an easy model for regional groups to comply with EPA's carbon rule

Advocates of multi-state plans to comply with U.S. EPA's proposal to cut carbon emissions often make an example of the Regional Greenhouse Gas Initiative (RGGI) -- a successful Northeastern cap-and-trade program involving nine states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

Regional grid operators and economists are pushing for states to work together to access a broader range of compliance options that might be less expensive than working alone. But collaborative state implementation plans outside RGGI could be significantly more complicated and would likely encounter many political and practical obstacles along the way.

For one, RGGI has done well in large part because it grew out of a voluntary agreement among state governors who wanted to act to reduce greenhouse gas emissions, said David Littell, a public utilities commissioner in Maine and treasurer of RGGI's board of directors. States that are less enthusiastic about making changes might not be as effective.

"It requires leadership at the top," Littell said. "If people have been forced into the room who don't want to be there, you're never going to resolve those issues."

Other attempts at similar systems -- in the Midwest and western United States -- have fizzled out when governorships changed hands.

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Doug Scott is chairman of the Illinois Commerce Commission and a former director of the Illinois Environmental Protection Agency, where he worked on the Midwestern Governors Association panel charged with developing a regional cap-and-trade system among six states and the Canadian province of Manitoba.

That project "lost critical mass" when governorships changed parties, Scott said. The same thing happened to a similar multi-state effort, the Western Climate Initiative, among Arizona, California, New Mexico, Oregon, Washington, Montana and Utah, he said.

RGGI overcame those obstacles, likely because governors of those states felt compelled to make the program work, Littell said.

"It's going to be hard in the immediate future because some political players prefer a fight to cooperation," he said.

Those hopeful about the opportunities for multi-state plans say times have changed. There was no EPA mandate then pressuring states to reduce emissions without greatly increasing electricity costs. Even if states are willing to work together, they might have trouble sorting out the details.

"I think what RGGI states have done is analogous only to the extent states are working together to reduce emissions," said Robert Kenney, chairman of the Missouri Public Service Commission. "There's an extra layer of complexity that I don't think is in RGGI states."

Following in RGGI's footsteps -- a long slog?

States looking at RGGI's model might want to consider how long it took to set up. The EPA rule incentivizes states to work together, giving them an extra year -- until mid-2018 -- to file plans after the regulation is expected to be completed in the summer of 2015.

During that time, they would likely have to do some complex calculations -- taking the target emissions rates issued by EPA and converting them into "mass-based standards," or a specific amount of carbon that would be emitted per year. They would have to overcome potential disputes on how much each state should contribute to reach an overall reduction level, and they might fight over taking credit for specific initiatives (ClimateWire, Nov. 18).

RGGI as a cap-and-trade program does not mandate how its members meet emission targets. The system caps the amount of carbon dioxide that can be emitted across participating states and then auctions off permits to companies that emit greenhouse gases. Multi-state compliance plans that don't pursue this kind of cap-and-trade system would have to hash out agreements on crediting for renewable energy and energy efficiency.

Kelly Speakes-Backman, a Maryland public service commissioner who is also chairwoman of RGGI's board of directors, said the whole process -- from the first discussion until the first auction -- took between four and five years.

Most of that time was spent making sure each state administration had the will and legal authority to enact the laws needed to partake in the system. And then the states had to negotiate how many permits to allocate to each state to auction off to generators.

States with governors who are already opposing EPA's proposal might take even longer to get that work done. And Littell said states will be so busy working through their own calculations and thinking up possible compliance options that they might not start talking about working together until after the rule is finalized next summer.

Difficult enforcement authority

Another big difference is that RGGI is voluntary -- the states that participate can leave at any time. New Jersey Gov. Chris Christie (R) pulled his state out of the program in 2011.

Legal analysts said that, as the EPA rule is written now, it's unclear what would happen to states that work together to create compliance plans and then violate them. No one knows who would be held accountable -- the rogue states or the states they leave behind.

To make their agreements binding, states would need an outside authority to oversee disputes and hold each of them accountable, said Raymond Gifford, a partner with Denver-based law firm Wilkinson, Barker and Knauer.

To do that, Gifford thinks they have two options. "One is you do these interlocking state plans that give EPA authority to make that decision, and no state's going to do that," he said. "Or you enter into an interstate compact, which has to go through Congress -- which ain't going to happen."

Not everyone agrees with that interpretation. Some believe states could work together under simple memorandums of understanding -- which is what RGGI has done.

Scott said states would just have to explain to EPA how they would enforce their plans and what they would do if another state stepped out of line. And they would have to be able to amend their plans if that happened.

Scott also thinks state agencies should write guidelines for what happens when states join and leave collaborative efforts -- so there's a "no regrets" approach. When RGGI first was formed, Massachusetts and Rhode Island dropped out at the last minute, choosing to rejoin just a couple of years later.

"I think you'll get much more willingness of states to do that ... if you're not locked in through 15 years and four different governors," he said.

For now, RGGI is assuming it will be able to sidestep the enforcement complications. EPA has repeatedly used RGGI as an example for multi-state compliance, and RGGI has assumed it won't have to cede authority to the federal government to use its cap-and-trade program to meet EPA requirements. RGGI has asked EPA to confirm that assumption in its final rule.

"Meeting the regional mass-based emissions cap will be the only federally enforceable component of the states' plan under the CPP [Clean Power Plan]," RGGI said in comments to EPA. "In other words, even if the emissions cap covers new sources or other sources that are not affected sources under the CPP, the EPA will still only consider whether the broader regional cap is met in determining states' compliance."

If that's true, RGGI might be an attractive compliance option for states considering working with others.

RGGI also asks EPA to confirm that other states could join RGGI without getting a separate individual plan approved. Although there have been no formal talks, at least a few states may be thinking of entering RGGI, according to multiple sources.

"We'll take as many as we can get," Speakes-Backman said.

Twitter: @emilyhholden | Email: eholden@eenews.net

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