presentation to rggi stakeholder group september 21, 2005
TRANSCRIPT
Presentation to
RGGI Stakeholder Group
September 21, 2005
Objectives
• Recap 2-Year Process
• RGGI Design Principles
• Present Details of Latest SWG Proposal to Agency Heads
• Present Details on Offsets
• Detail Projected Impacts of Proposal
• Hear Feedback
The RGGI Process
Recap Process
• Governor’s April 2003 Invitation
• July 2003 Launch Announcement
• Action Plan Announced after September 2003 Meeting of RGGI Agency Heads
• Formal Stakeholder Process Initiated on Regional Level
Recap Process
• Meetings of the Staff Working Group
• Meetings of RGGI Agency Heads
• 9 Meetings of Regional Stakeholder Group; 3 Expert
Workshops
• Many Informal Meetings with Stakeholders
• Website: www.rggi.org
Key Program Components
The Model Rule
Memorandum of
Understanding
The Groundwork
Data Assembly
Electric Sector Modeling
Economic Modeling Analysis
Stakeholder Process
Post-Model Rule
Rulemaking
Regional Organization
&
Recap Design Principles
• Reduce CO2 with flexible, market- based program to achieve least cost reductions.
• Create model for federal program.
• Maintain electricity affordability, reliability and fuel diversity.
• Make expandable to other states.
• Build on programs in place.
The Revised SWG Proposal
SWG Proposal
• Start Date of 2009.• Two-Phase Cap—stabilization at
approximately 150 million tons through 2015; 10% reduction by 2020.
• Built-in Review of Program in 2015 to Assess:– Program progress in meeting emissions reductions
goal– Price impacts– Numerical limits on offsets– Imports and associated leakage
• State Allowance Budgets as agreed among states after considering various metrics.
• Offsets– Initial Offset Types:
• landfill gas; • sulfur hexaflouride gas from electricity T&D; • natural gas/home heating oil/propane end-use efficiency;
and• afforestation.
– Additional offset types to be developed– CDM & EU allowances above sustained
allowance price
SWG Proposal
SWG Proposal
• Limit on the Use of Offsets equal to 50% of the Difference between BAU and Cap
Tons
Business as Usual Emissions
Difference between BAU Emissions and Cap
Cap Level
‘09-‘11 ‘12-‘14 ‘15-‘17 ‘18-‘20
3-Year Compliance Periods
Line Dividing Difference in Half
• Allowance Allocations:– 20% “Public Benefit” Allocation
– 5% Strategic Carbon Fund to achieve additional reductions
– Remaining 75% left to states
SWG Proposal
• 20% of Each State’s Budget to Public Benefit Purposes:– “Public benefit purposes may include the
use of allowances to promote energy efficiency, to directly mitigate electricity ratepayer impacts, promote renewable energy technologies, and/or to stimulate or reward investment in technologies that will reduce emissions of carbon dioxide from power generation in the state.”
SWG Proposal
• 5% to Regional Strategic Carbon Fund:– Each state would contribute 5% of its
emissions budget to the fund;– The fund would be administered by a regional
organization to develop additional project-based reductions, in part to offset emissions leakage;
– The fund could also be used to develop new offset standards.
SWG Proposal
• On Emissions Leakage:– States will implement strategic carbon fund
to offset emissions leakage;– States will monitor imports and attempt to
quantify leakage.– As part of 2015 review, states will consider
the significance of any leakage and whether additional measures to address emissions leakage should be implemented.
SWG Proposal
• Other Program Components:– 3-year Compliance Period
– Allow Early Reduction Credits
– Allow Banking
SWG Proposal
Focus on Offsets
Initial Eligibility:• Landfill Gas (methane capture and destruction)• SF6 (capture and recycling)• Natural Gas/Oil/Propane end-use energy efficiency
measures (may include solar thermal)• Afforestation (non-forested to forested state)
Eligibility Broadened based on Sustained Price Trigger:• EU Emissions Trading Scheme Allowances• Clean Development Mechanism CERs
• Additional offsets types to be added over time (sustainable forestry management targeted on priority basis)
SWG Proposal: Offsets
Addressing Additionality:• Specific, detailed criteria for each eligible offset type
applied through a standardized benchmark approach• Criteria applied up-front, limiting discretion in
approval or denial of applications• SWG approach in developing detailed offsets
standards is consistent with general criteria expressed in MA 310 CMR 7.29 (real, surplus, verifiable, permanent, and enforceable)
• SWG will be seeking feedback on detailed criteria as part of draft Model Rule public review process
SWG Proposal: Offsets
Individual offsets standards to include details and specific criteria addressing the following:
• Project eligibility• Emissions baseline determination• Calculation of emissions reductions• Monitoring and verification requirements• Other requirements specific to each offset type (e.g., permanence
and leakage issues for afforestation)
Issuance of credits:• Projects will be pre-approved (eligibility and emissions baseline)• Issuance of offsets credits will be based on demonstrated
reductions (verified emissions reductions/sequestration)• Third-party certification may be required (emissions baseline and
M&V)
SWG Proposal
Stakeholder Feedback:• SWG currently soliciting feedback on content of
specific standards components elaborated• Stakeholders will have opportunity to provide detailed
feedback on standards as part of the draft Model Rule public review process.
• SWG will be seeking feedback on specific proposed additionality and other key criteria for individual offsets types
SWG Proposal: Offsets
Years
SWG Proposal: Offsets
• Limit on the Use of Offsets equal to 50% of the Difference between BAU and Cap
Tons
Business as Usual Emissions
Difference between BAU Emissions and Cap
Cap Level
‘09-‘11 ‘12-‘14 ‘15-‘17 ‘18-‘20
3-Year Compliance Periods
Line Dividing Difference in Half
Calculating the Offsets Limit:
SWG Proposal: Offsets
Business as Usual Emissions (BAU) (Bx)
Cap Level (Cx)Difference between BAU and Cap Level
X1 X2 X3 X4
SWG Proposal: OffsetsCalculating the Offsets Limit:
Ax = [(Bx – Cx)0.5]/Cx
Where:X is the compliance periodA is the maximum offsets percentage applied to the sourceB is the regional total projected BAU emissionsC is the regional total cap level
The overall regional limit will be represented as a percentage of the emissionsbudget in each compliance period. This percentage limit will then be applied atthe source level. For instance, if the limit is 5%, an EGU with reported emissionsof 1,000,000 tons in a particular compliance period could submit 50,000 tons ofoffsets for compliance in that respective compliance period.
Applying the limit as a percentage of reported emissions as opposed to aspecified allowable tonnage number acknowledges that there is a degree ofuncertainty in projecting BAU emissions.
Offsets Limit in Context:• RGGI setting a precedent in applying a limit • Limit expressed as percentage of emissions budget• Regional percentage limit applied at the source (as
percentage of reported emissions - acknowledges degree of uncertainty in projecting BAU emissions)
• Limit is equivalent to following % of annual emissions budget in each compliance period (working proposal):– CP #1 (stabilization phase): 0.4% (550,000 tons/yr)– CP #2 (stabilization phase): 1.4% (2,150,000 tons/yr)– CP #3 (reduction phase): 3.6% (5,250,000 tons/yr)– CP #4 (reduction phase): 8.3% (11,450,000 tons/yr)– Annual average through 2020: 3.3%
SWG Proposal: Offsets
Modeling Offsets: Data
• Supply curves used for LFG, SF6, and afforestation (natural gas end-use not modeled - functionally, modeling assumes these offsets do not exist)
• National supply curves used for LFG and SF6, regionalized based on estimated supply in 9-state RGGI region
• LFG and SF6 supply curves are consistent with EPA national supply curves
• Afforestation supply curve based on analysis conducted by Sampson Group for RGGI
• Conservative RGGI adjustments employed to account for regional supply issues and uncertainty
• Cost adder used (all offsets have positive market cost to account for market incentive & transaction costs - even if project has positive NPV absent RGGI)
SWG Proposal: Offsets
Available Annual Supply:• LFG (2010): 6.4 million short tons CO2e at up to $2.80/ton; 6.9
million short tons at $9.80/ton• SF6: 450,000 short tons CO2e at up to $1.50/ton• Afforestation: 165,000 short tons CO2 at $10/ton; 830,000 short
tons at $20/ton• CDM: $6.50/short ton CO2e - no assumed limit on available
supply
Quantitative Limit: • Tonnage limit applied by run year based on difference between
reference case emissions and modeled cap limits (50%)
Modeling Offsets: Supply Curves
SWG Proposal: Offsets
Questions?