Regional Cap-and-Trade Systems: Prospects for Energy Efficiency
Report Summary
Regional cap-and-trade programs for greenhouse gases create a unique opportunity for energy efficiency. While current prospects for a national cap-and-trade program are slim, on the regional level one of these programs is already in effect. The Regional Greenhouse Gas Initiative (RGGI) has been up and running in the northeast United States since 2008. On the opposite coast, the Western Climate Initiative (WCI) is currently scheduled to begin in 2012, while the Midwest has created its own plans for such a program.
RGGI has demonstrated the tremendous potential for energy efficiency to mitigate the costs of carbon regulation programs while bolstering the economy with job creation and utility bill savings. One analysis, conducted by Environment Northeast, found that RGGI’s $389 million investment in efficiency will yield $940 million in energy savings and create nearly 18,000 job-years, defined as a full time job for a year.
There are several ways that cap-and-trade systems can promote and incentivize energy efficiency. These include direct investment of allowance revenues, offset projects, and price signals. This report explores strategies for maximizing efficiency benefits within trading program design, and identifies successful cases.
Despite spurring impressive efficiency gains, regional cap and trade faces an uncertain future. State budget deficits have forced some RGGI states to reallocate program funds for non-energy purposes. In the Western and Midwestern programs, shifting political tides have called into question the future of these programs. This report identifies and explores the challenges facing regional cap-and-trade programs and their potential to advance energy efficiency programs to the benefit of states, utilities, and ratepayers alike.
