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About MMA MunEnergy Greenhouse Gas Initiative could boost energy costs
The Regional Greenhouse Gas Initiative, scheduled to go into full effect on Jan. 1, 2009, will reshape the electric power market – and could have the effect of increasing electricity costs.
Seven months after signing on to the program, the Patrick administration recently reaffirmed its commitment to the initiative as part of a cleaner energy future. On Aug. 10, Energy and Environmental Affairs Secretary Ian Bowles announced that draft regulations are completed for the state’s participation in the cap-and-trade system. This makes Massachusetts the first of the 10 Regional Greenhouse Gas Initiative member states to issue rules for instituting the market-based mechanism for reducing emissions. The effort will limit carbon dioxide emissions from large electric power plants.
Massachusetts has been a leader in addressing climate change, as the first state in the country to regulate greenhouse gas emissions under a system developed in 2001. The new regulations, under the Regional Greenhouse Gas Initiative, will extend the coverage from six power plants to 32 across the state.
The cap-and-trade system works as follows: Annual emissions from power plants of 25 megawatts and larger will be capped at around 26 million tons through 2014, with the caps reduced by 2.5 percent per year for the following four years. Under the regional initiative, each state in the program is given “allowances” for its emissions. Electricity generators will need one allowance for every ton of carbon dioxide they emit.
Gov. Deval Patrick has announced that Massachusetts will auction its emissions allowances and use the funds generated by the sales to fund energy efficiency, peak-demand reduction, and other cost-cutting efforts. Auction proceeds are estimated at $25 million to $125 million per year, possibly higher. The first auction is set for the second quarter of 2008.
When generating companies pay for these allowances at the auction, however, the high cost will likely be passed on to consumers in the form of higher electricity rates.
While the administration aims to cut energy costs through the auction proceeds, some are concerned that the Regional Greenhouse Gas Initiative as a whole will raise rates significantly, and many large energy users and industry groups have opposed the plan. A recent study by the Electric Power Research Institute supports these concerns. According to the report, without investment in advanced technologies, trying to reduce greenhouse gas emissions will drive up electricity and natural gas prices and slow economic growth.
Similar conclusions were drawn in an analysis of the region’s electricity needs conducted by the New England Independent System Operator (ISO-NE), released in August.
The Regional Greenhouse Gas Initiative, as the nation’s first cap-and-trade program of its kind, brings both hope for a cleaner energy future and uncertainty about already-rising energy costs.
Emily Neill, manager of the MMA’s MunEnergy program, can be reached at (617) 772-7513 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
About MMA MunEnergy Greenhouse Gas Initiative could boost energy costs
Greenhouse Gas Initiative could boost energy costs
The Regional Greenhouse Gas Initiative, scheduled to go into full effect on Jan. 1, 2009, will reshape the electric power market – and could have the effect of increasing electricity costs.
Seven months after signing on to the program, the Patrick administration recently reaffirmed its commitment to the initiative as part of a cleaner energy future. On Aug. 10, Energy and Environmental Affairs Secretary Ian Bowles announced that draft regulations are completed for the state’s participation in the cap-and-trade system. This makes Massachusetts the first of the 10 Regional Greenhouse Gas Initiative member states to issue rules for instituting the market-based mechanism for reducing emissions. The effort will limit carbon dioxide emissions from large electric power plants.
Massachusetts has been a leader in addressing climate change, as the first state in the country to regulate greenhouse gas emissions under a system developed in 2001. The new regulations, under the Regional Greenhouse Gas Initiative, will extend the coverage from six power plants to 32 across the state.
The cap-and-trade system works as follows: Annual emissions from power plants of 25 megawatts and larger will be capped at around 26 million tons through 2014, with the caps reduced by 2.5 percent per year for the following four years. Under the regional initiative, each state in the program is given “allowances” for its emissions. Electricity generators will need one allowance for every ton of carbon dioxide they emit.
Gov. Deval Patrick has announced that Massachusetts will auction its emissions allowances and use the funds generated by the sales to fund energy efficiency, peak-demand reduction, and other cost-cutting efforts. Auction proceeds are estimated at $25 million to $125 million per year, possibly higher. The first auction is set for the second quarter of 2008.
When generating companies pay for these allowances at the auction, however, the high cost will likely be passed on to consumers in the form of higher electricity rates.
While the administration aims to cut energy costs through the auction proceeds, some are concerned that the Regional Greenhouse Gas Initiative as a whole will raise rates significantly, and many large energy users and industry groups have opposed the plan. A recent study by the Electric Power Research Institute supports these concerns. According to the report, without investment in advanced technologies, trying to reduce greenhouse gas emissions will drive up electricity and natural gas prices and slow economic growth.
Similar conclusions were drawn in an analysis of the region’s electricity needs conducted by the New England Independent System Operator (ISO-NE), released in August.
The Regional Greenhouse Gas Initiative, as the nation’s first cap-and-trade program of its kind, brings both hope for a cleaner energy future and uncertainty about already-rising energy costs.
Emily Neill, manager of the MMA’s MunEnergy program, can be reached at (617) 772-7513 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Written by MunEnergy Program Manager Emily Neill
