RGGI Model Rule Preliminary Comments Alan Nogee Clean Energy Program Director Union of Concerned Scientists May 2, 2006 Hartford, CT

RGGI will be effective in its own right and as a national model to the degree it requires the Northeast electricity sector to reduce its contribution to carbon emissions. RGGI can and should dispel the myth that the problems and solutions are always in other sectors and other regions.

Electricity should be easiest, least expensive sector to control Recent EIA modeling of National Commission proposal in different allowance price scenarios: –Electricity accounts for 40% of emissions –Electricity provides 2/3 of emission reductions in modest reduction scenarios –Electricity provides 85% of reductions in deepest scenarios (though more expensive than necessary because EIA doesn’t include additional energy efficiency.)

RGGI reductions are modest and need to be real No exemptions without decreasing the cap E.g., UCS is a strong advocate of co-firing biomass and coal. But when biomass contribution exceeds 50%, fossil emissions do not magically fall to zero, and should not be exempted. If there are particular circumstances that have led to proposed exemptions, important to identify to enable stakeholders to help address in ways that don’t threaten program integrity.

Reducing carbon in electricity means replacing or decarbonising coal National Commission Case 4 Only scenario with overall carbon reductions –10% power plant carbon reductions by 2021 –44% by 2030 Coal makes the difference Reference case net new coal plants Case 4 - gradually replacing 125 coal plants: NO new conventional coal Source: EIA, Energy Market Impacts of Alternative Greenhouse Gas Intensity Reduction Goals, March

RGGI surrounded by proposed new coal plants 135 plants (85 GW) proposed nationally PA, WV, VA proposals sufficient to offset >100% of RGGI reductions If leakage encourages new coal plants to be built, will emit for years. Much more expensive to reduce later.

Need to overcome barriers to efficiency and renewable investments With low offset safety valve trigger, companies may choose MORE EXPENSIVE spot market offsets over less expensive long-term investments Maximize consumer allocations Strong 5 point offset test Consider revising/eliminating offset trigger prices More mechanisms to encourage additional efficiency and renewables Key to the region receiving the economic development benefits from solutions