May 27, 2011
New Jersey

New Jersey to exit carbon-reduction program

By LISA FLEISHER And CASSANDRA SWEET, The Wall Street Journal, 26 May 2011

New Jersey Gov. Chris Christie said Thursday that he plans to remove the state from a regional U.S. greenhouse-gas emission-reduction program.

The nearly six-year-old program, called the Regional Greenhouse Gas Initiative, or RGGI (pronounced, “Reggie”), includes 10 Northeastern states from Maine to Maryland and is the only operating U.S. cap-and-trade program. RGGI member states require power-plant operators to cap their carbon-dioxide emissions and gradually reduce the emissions over time. The goal is to cut power-sector carbon dioxide emissions by 10% by 2018.

Mr. Christie’s decision to exit RGGI follows efforts by other Republican governors to reverse their states’ participation in similar climate programs. Such programs have come under increasing pressure amid continued economic difficulties in many states and a lack of consensus in Washington over whether and to what extent the U.S. should establish a climate policy.

Companies in RGGI states that can’t cut their emissions can buy pollution allowances from a state, or from each other. States have spent the proceeds of allowance sales on renewable energy and energy-efficiency programs.

Since 2009, New Jersey has generated $113 million from sales of pollution allowances. Mr. Christie has tapped some of those funds to balance the state’s budget.

Mr. Christie said the RGGI program doesn’t work, although he said he believes that humans play a part in climate change and that he is committed to reducing pollution.

The RGGI program “is a failure,” Mr. Christie said at a press conference in Trenton, N.J. He added that New Jersey has met its greenhouse-gas emissions-reduction goals.

It was unclear what affect, if any, New Jersey’s withdrawal from the program might have on the market for RGGI pollution allowances.

Prices for RGGI pollution allowances for 2011 were unchanged Thursday after Mr. Christie’s announcement, according to a carbon brokerage in New York.

“New Jersey’s withdrawal is certainly a shock, but its impact on the market will be limited,” Emilie Mazzacurati, head of carbon market research firm Point Carbon Research North America, said in a statement.

RGGI allowances have been trading at rock-bottom prices over the last two years, amid an over-supply that market participants have attributed to a relatively loose emissions cap and weak power demand during the recent economic downturn and sluggish recovery.

New Jersey carbon emissions from power plants currently are 30% below the RGGI cap, said Bob Martin, commissioner of the state Department of Environmental Protection.

“The cap was set too high to start off with,” Mr. Martin said. He added that state officials were worried that continued participation in RGGI could lead to higher costs for power plant operators.

Environmental activists say the program’s cost to consumers is relatively low. Jeff Tittel, head of the New Jersey Sierra Club, said it wasn’t as tough as some would have liked.

“It’s a very moderate program,” he said. “It’s not like this is some big Sierra Club, socialistic, make-everyone-ride-bicycles-and-have-solar-panels-on-their-house type of proposal.”

Conservatives say the higher energy bills that come because of RGGI keep businesses away or drive them out of the state. Some critics have pointed to Pennsylvania, which isn’t a member of RGGI, as being more business friendly and having lower electricity rates than New Jersey.

Mr. Christie, however, suggested that the cost was nominal, and said that he didn’t want to “overplay” the benefit that consumers would see on their utility bills after the state withdrew from the RGGI program.

The move to withdraw New Jersey from RGGI follows similar efforts by Republican Govs. Susana Martinez of New Mexico and Jan Brewer of Arizona to dial back their states’ participation in emissions-reduction programs.

In January, Ms. Martinez attempted to block a greenhouse-gas reduction regulation adopted the previous month by the administration of Bill Richardson, a Democrat. The state Supreme Court reinstated the rule later that month.

In February 2010, Ms. Brewer withdrew Arizona from the Western Climate Initiative, a regional cap-and-trade emissions program led by California.

California plans to launch a new cap-and-trade program next year as part of the state’s 2006 plan to combat climate change, which was established during the administration of Arnold Schwarzenegger, a Republican.

A California court last week ordered state regulators to suspend activities related to the cap-and-trade program, pending revisions to the environmental review for the program. The state Air Resources Board, which oversees the state’s climate plan, said it was complying with the ruling and expected to start the cap-and-trade program next year.

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