Pulling Out of Greenhouse Gas Initiative an Expensive Mistake, Study Suggests

Derided by administration, RGGI actually created 1,700 jobs in the Garden State

New Jersey is losing the opportunity to create jobs and spur growth by pulling out of a 10-state initiative to reduce greenhouse gas emissions, a new study suggests.

In an economic analysis of the impact of the Regional Greenhouse Gas Initiative (RGGI), a study commissioned by utility regulators claims that a cap-and-trade program initiated by Northeast states resulted in the creation of 1,772 jobs and $151 million in economic value in New Jersey and a total of 16,135 jobs and $1.6 billion in economic value throughout the region .

Gov. Chris Christie, in a decision that drew sharp criticism from clean energy advocates and Democratic lawmakers, announced in May that New Jersey would pull out of the program at the end of this year, calling it ineffective environmentally and nothing more than an electricity tax. Christie’s move was especially disappointing to RGGI’s backers, who hoped the regional initiative would serve as a successful prototype for a national effort to combat global climate change.

The study, done by the Analysis Group for the National Association of Regulatory Utility Commissioners, noted that the $912 million paid out by electric customers to finance the program is offset by the more than $1.1 billion in electric savings and $174 million in gas savings customers will reap from a drop in energy use because of energy efficiency projects funded under the initiative.

The $912 million in allowances paid out by power suppliers for each ton of carbon dioxide they emit is eventually passed on to utility customers. The money raised by the allowances is redistributed among the 10 states to use primarily on clean energy initiatives, although some states such as New Jersey used the money to plug holes in their budgets.

New Jersey received $118 million, but $75 million of that total was used to close budget deficits in the last year of Gov. Jon Corzine’s term and the first year under Christie, who diverted $63 million of the total.

“As the first U.S. experiment with a carbon price in electricity markets, RGGI has produced actual historical data that reveal the concrete economic impact at the state and regional levels,’’ said Susan Tierney, one of the authors of the study and a managing principal in the Analysis Group, which is based in Boston. The report did not examine whether the program was meeting its environmental goals.

Steve Lonegan, state director of Americans for Prosperity, a conservative group that lobbied hard to have New Jersey pull out of RGGI, said he had not yet fully reviewed the report but called it flawed.
“It’s a bunch of government regulators trying to justify their existence,’’ Lonegan said, calling RGGI an “income redistribution’’ program thought up by bureaucrats to take money from taxpayers.

The report argued otherwise. It claimed the economic benefits resulting from RGGI stem from the way the states use the funds raised by the allowances to buy goods and services—ranging from energy audits, increased sales of energy efficiency appliances, and labor to install solar panels.

Those investments lead to a drop in electricity prices over time, according to the report. The savings, a net gain of $1.1 billion, break down into a drop in electricity bills of $25 for residential customers, $181 for commercial consumes and $2,493 for industrial firms over the next decade.

Jeff Tittel, director of the New Jersey Sierra Club, argued that the savings would have been even more substantial in New Jersey if the Christie administration had not siphoned off $63 in RGGI proceeds to balance its first state budget.

The report also noted reduced demand for electricity as a result of RGGI kept $765 million in the local economy instead of sending the dollars out of the region to pay for fossil fuels such as natural gas and coal, which are largely not produced in the 10-state region.

Whether the study marks a shift in the national debate over global climate change remains to be seen, but the authors argued that the results are significant, given the size of the 10 states. They represent one-sixth of the nation’s population and one-fifth of the U.S. Gross Domestic Product (GDP), while using 11 percent of the country’s power generation, but accounting for only 6 percent of all the U.S. carbon emissions.

Given the nature of national politics, Matt Elliott, clean energy advocate for Environment New Jersey, said it is unlikely any national program will move forward soon. “But the study show what we hoped RGGI would demonstrate—it is good for the environment and it is good for the economy,’’ he said.