Maine’s participation in the Regional Greenhouse Gas Initiative (RGGI) will be the subject of extensive legislative debate in the next several weeks as the Joint Standing Committees on Natural Resources and Utilities and Energy consider several policy proposals to implement the program in Maine.

RGGI is a market-based program adopted by nine Northeastern states that would cap emissions of carbon dioxide – CO2 – from fossil-fuel fired electric generating plants and allow the facilities to purchase credits or reduce CO2 emissions to meet the cap requirements.

In Maine, the natural gas power plants at Westbrook, Veazie, Rumford, Bucksport, and Jay would be subject to the emission caps, as would Florida Power and Light’s oil-fired unit on Cousin’s Island. The Bucksport and Jay facilities are owned by papermaker Verso, and are used to primarily to generate power for their mill operations.

The RGGI states have developed a “Model Rule” that provides a broad outline for the participating states to follow in implementing the program. The program would commence in 2009 with a baseline cap on emissions (average of emission years 2000-2004) extending to 2014, followed by a 2.5 percent reduction per year through 2019.

Last year, the Maine Department of Environmental Protection held a series of workshops around the state to educate the public on the RGGI program and to solicit feedback on several key implementation issues. One of the major policy issues under discussion concerns the so-called “public-benefit” account.

Under the RGGI model rule, all the participating states must set aside at least 25 percent of a state’s emission credits to be used for public benefit purposes, such as rebates to ratepayers to offset higher electricity rates, or for energy efficiency projects to reduce electricity demand. Some RGGI states have already agreed that 100 percent of the emission credits should be auctioned with all proceeds going to a public benefit fund.

Other threshold policy issues that will need to be resolved include how much of the state’s emission cap should be set aside for new power plants, what methods should be used for allocating emission allowances, and the type and scope of projects that could be used to “offset” greenhouse gas emissions (i.e., methane gas capture at landfills, forestry projects, etc.)

To date, two legislative proposals have been submitted that would guide RGGI implementation in Maine. LD 1090, “An Act To Authorize the State’s Participation in the Regional Greenhouse Gas Initiative,” sponsored by natural resources committee house chair Rep. Ted Koffman, D-Bar Harbor would, among other things, require Maine to auction 100 percent of the state’s emission credits with proceeds going to an energy efficiency trust account administered by the Public Utilities Commission.

LD 1381, “Resolve, To Ensure the Success of Regional Climate Change Efforts,” submitted by Rep. Ken Fletcher, (R-Winslow) is a resolve which would require the state’s Public Advocate to study the economic impacts of the RGGI program on Maine’s electricity consumers, and provide alternatives for reducing electric rates.

A third proposal from the governor’s office is expected out shortly.

There are significant uncertainties in how RGGI will impact electricity costs in the region. While some model results predict average residential electric rates could go up by a half-cent to one cent per kilowatt-hour, precise cost estimates are impossible to determine at this time.

Model predictions are highly dependent on the trading price of the emission credits, economic growth assumptions, and the various mechanics of the auction process itself. If done incorrectly, RGGI could have a significant cost impact on Maine’s manufacturing sector, which has already suffered through double-digit energy increases over the past few years.

The Maine State Chamber and Maine Pulp and Paper Association will continue to follow this important issue closely as hearings are scheduled in the next few weeks.

Information and documents on RGGI can be accessed at www.state.me.us/dep/air/rggi.htm.

Michael Barden is director of environmental affairs for the Maine Pulp and Paper Association in Augusta. He can be reached at 622-3166 or emailing [email protected]. This article first appeared in the March 15 issue of Impact, the newsletter of the Maine State Chamber of Commerce, and is reprinted here with its permission.
If done incorrectly, RGGI could have a significant cost impact on Maine’s manufacturing sector, which has already suffered through double-digit energy increases over the past few years.