by Karl Coplan
So New Jersey has announced it will withdraw from the Regional Greenhouse Gas Initiative, the northeast region’s joint cap-and-trade program. Governor Christie’s news conference and press statement are available here, and is worth a read. Christie is not taking the usual Republican denialist position that human-caused climate change is a myth. Instead, he complains that RGGI has been ineffective in raising the price of carbon credits enough to make any change in consumption patterns:
First, RGGI allowances were never expensive enough to change behavior as they were intended to and ultimately fuel different choices. When RGGI began the industry projected that the cost of allowances would eventually be as high as twenty to thirty dollars a ton compared to the current price of less than $2 per ton, at which point the cost would have been sufficient to affect a decision of energy producers to choose lower carbon fuels or more efficient production technologies. This is not the case. It has not happened. Trends indicate the cost of the allowance will continue to be at the floor reserve price and there will be no significant secondary market for allowances. In other words, the whole system is not working as it was intended to work. It’s a failure.
Christie is basically complaining that RGGI is a failure because it does not make fossil-fuel based energy expensive enough! I can agree with him on that — RGGI is not a real cap-and-trade program designed to achieve the necessary reductions in GHGs (it’s 2018 target reduction is just 10%, far short of the 20% reduction by 2020 generally viewed as necessary to get our economy on track to a 50-80% reduction by 2050). It’s more of a “cap-and-trade light” program designed to demonstrate that trading systems are possible, and to get industry buy in.
Nevertheless, even after complaining that emissions allowances are too cheap, Governor Christie added the obligatory complaint that RGGI is an unnecessary tax on New Jersey consumers — essentially saying that the RGGI trading system is too cheap, and too expensive, at the same time.
New Jersey’s withdrawal from RGGI casts doubt on the ability of these regional greenhouse gas trading programs to make real progress towards reducing climate change. They have to allow state withdrawals to avoid running afoul of the Constitution’s compact clause, which requires congressional approval of binding interstate compacts. Political pressure on states to withdraw will be greatest when a regional initiative actually succeeds in raising the price of fossil fuel generated energy sufficiently to affect consumption patterns. New Jersey’s withdrawal is even more problematic: Governor Christie is withdrawing from RGGI because it has not made electricity expensive enough!