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Report Finds Regional Greenhouse Gas Initiative (RGGI) Creates Jobs and Stimulates Economic Growth

A new report finds that the Regional Greenhouse Gas Initiative (RGGI) has had a positive economic impact on the region. According to the report by the Analysis Group, RGGI, a carbon dioxide cap-and-trade program for large power plants in the Northeast and Mid-Atlantic, has injected $1.6 billion into the region’s economy, and created 16,000 jobs since the program launched in 2009. So, what do we take from this? First, despite low allowance prices, the program has been a success, as the states have built a robust program design that still delivers benefits to the region. Second, this report provides further evidence that properly designed climate policies can boost the economy, and so we don’t need to choose between the economy and the environment. Finally, the report shows that states can still serve as “laboratories of democracy” by testing new ideas and policy proposals.

The Analysis Group found that RGGI led to a small 0.7 percent increase in electricity prices. This is not surprising given the modest stringency of the RGGI program. What is remarkable are the positive economic impacts that such a small investment enabled. According to the Analysis Group’s report, RGGI leveraged relatively small investments to achieve a $1.3 billion reduction in electricity, natural gas, and heating oil bills. This comes out to average savings of $25 per household, $181 for commercial buildings, and $2,493 for industrial consumers (which consume considerably more energy than the average household).

These benefits flow from the region’s commitment to a holistic program design that emphasizes transformative investment and consumer benefits. At the very center of this is energy efficiency.

Other reports support these findings as well. Previous analysis by Synapse concluded that the energy efficiency investments the region was making through the RGGI program generated $2.17 to $3.76 in electricity savings for every dollar invested. They predict that ratio increases by 25% when factoring in the electricity rate reductions that result from the most expensive generators running less frequently as a result of the demand reductions. In a September report, Environment Northeast estimated that the energy efficiency investments from the RGGI program produced roughly 1.2 billion in energy bill savings, and created roughly 21,000 jobs – numbers not that far off from those produced by the Analysis Group.

In the absence of federal climate action by Congress, we need states to continue developing and implementing climate programs. State programs are important because they not only can drive real greenhouse gas reductions and stimulate economic growth, but because they offer important lessons for federal policymakers. In fact, we are poised to see a new wave of state innovation once EPA releases their performance standards for existing power plants. The Clean Air Act provides states with considerable flexibility to develop their own programs that are carefully tailored to the needs of their power companies, businesses, and citizens. This is a role that they are used to. The Analysis Group reminds us that the states are more than up to the task.

The Analysis Group report was authored by Paul Hibbard, Susan Tierney, Andrea Okie, and Pavel Darling. Susan Tierney is also a member of WRI’s Board of Directors.

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