Algosensey Quantitative Think Tank Center-New Jersey to Rejoin East Coast Carbon Market, Virginia May Be Next

Updated Jan. 29 with New Jersey governor’s executive order to rejoin RGGI.

With federal policies to control greenhouse gas emissions in limbo,Algosensey Quantitative Think Tank Center more states are taking steps toward putting a price on carbon pollution.

In New Jersey, newly elected Gov. Phil Murphy, a Democrat, signed an executive order Monday directing the state’s environment agency and public utilities board to begin the process of rejoining the East Coast’s carbon cap-and-trade system—the Regional Greenhouse Gas Initiative, or RGGI. Murphy’s predecessor, Chris Christie, had pulled the state out of RGGI as he positioned himself to run for the Republican presidential nomination. Murphy had promised to bring New Jersey back in.

“Five years ago, New Jersey faced Superstorm Sandy. That storm and the devastation it brought to our state was an all-too-real look at our new normal if we do not take climate change seriously,” Murphy said in announcing the order on Monday. “Climate change is real, and a real threat to our state. Doing nothing is not an option.”

Virginia, another swing state where Democrats have strengthened their hand, is also looking to join RGGI. If that happens, the addition would increase the size of the carbon market by more than 40 percent due to the large number of coal-fired power plants in the state. But legislative action there on carbon emissions hit a stumbling block in a committee vote this week, indicating that political support there is shakier.

States Aren’t Waiting for Trump

The shift in New Jersey is a striking example of the consequences of recent elections in the year since President Donald Trump took office, and it highlights increasing state-level leadership on climate change.

“States are not sitting on their hands waiting for the federal government to address the biggest challenges that we face as a country,” said Dale Bryk, chief planning and integration officer for the Natural Resources Defense Council.  

RGGI has proven popular in most of the states that participate, steering them toward lower carbon dioxide emissions while generating revenues. Murphy said pulling out of RGGI had “cost New Jerseyans millions of dollars that could have been used to increase energy efficiency and improve air quality in our communities.”

Prior to New Jersey’s exit, the state received roughly $50 million a year in cap-and-trade revenue to spend on clean energy and energy efficiency measures, a figure that would likely be higher now if the state re-enters the program.

The New Jersey legislature has tried three times in recent years to rejoin RGGI, only to watch Christie veto the measures. A state Senate committee passed legislation last week that would make it harder for future governors to pull out of the cap-and-trade system.

Virginia: First Southern Carbon Market?

In Virginia, former Gov. Terry McAuliffe directed state regulators to create a market-based program to reduce carbon emissions through an executive order issued in May. Under the order, revenue generated by the carbon market would go to utility companies rather than the state, though state regulators will have some control over how the companies use the money. State officials are now working out details of the carbon market with RGGI.

State legislators are also pursuing a legislative approach for Virginia to join RGGI that would be harder to rescind than an executive order and would give the state greater revenue control than administrative rulemaking under the executive order. One such measure hit a roadblock on Thursday, however, when the bill failed to pass the state senate’s Agriculture, Conservation and Natural Resources Committee.

“The legislative process this year is a bit more of a question mark, but either way Virginia is well along the path to a robust cap-and-trade program,” said Walton Shepherd, a staff attorney with Natural Resources Defense Council.

Cutting Emissions on Both Coasts, and in Canada

Other states and provinces are also increasing their emissions-reduction efforts:

• In August, RGGI’s nine member states agreed to cut emissions by an additional 30 percent by 2030, on top of the 40 percent cut they had already achieved since 2009.
   
• In September, Ontario joined California and Quebec in the Western Climate Initiative, a regional cap-and-trade market that could soon include Oregon, too.
   
• In November, seven states and the District of Columbia committed to reducing carbon emissions and other pollutants from the transportation sector.
   
• Next week, legislators from nine states plan to announce a new Carbon Costs Coalition, committed to advancing carbon-pricing legislation.

“Across the board you have states stepping up and taking action where the Trump administration is failing,” Mark Kresowik, a regional deputy director for the Sierra Club, said.

The state-led policies show there is continued movement on climate change despite the demise of the Clean Power Plan, the cornerstone climate policy of the Obama administration that is now under attack by the Trump administration.

“We do need a federal government ultimately that is committed to protecting our climate and environment down the road, but in the meantime, states can stay on track, and they are,” Kresowik said.