Regional Greenhouse Gas Initiative Research Articles

Was carbon pricing effective in Virginia? The withdrawal from RGGI

ABSTRACT Climate change has drawn increasing attention worldwide. Market-based Cap and Trade (CAT) programmes achieve environmental goals in the most cost-efficient way. This timely research evaluates the effectiveness of Virginia’s involvement in the Regional Greenhouse Gas Initiative (RGGI), a CAT programme that Virginia joined in 2021 but decided to withdraw from in 2023. We find significant evidence that RGGI reduced CO 2 emissions from the power sector in Virginia during the regulation period. Both coal and natural gas (NG) plants reduced their generation and CO 2 emissions. The findings support Virginia’s continuation of RGGI regulations.

Sustainable development of the water-energy-Co2 nexus in the refining sector: A stochastic multi-objective optimization under emissions trading systems

Refineries consume substantial energy and water while emitting significant CO2. Solvent-based Carbon Capture (CC) offers a viable CO2 mitigation solution but increases water and energy consumption and requires considerable investments. This research aims to overcome these barriers and improve the Iranian refining sector towards Sustainable Development Goals (SDGs) 6, 7, and 13 by mitigating CO2 emissions, producing low-carbon hydrogen, and utilizing unconventional water resources for CC plants. A comprehensive nexus approach was incorporated to account for the intricate interconnections between SDGs and refineries' water, energy, and CO2 networks. We evaluate the implementation of CO2 market regulations corresponding to seven international Emissions Trading Systems (ETSs) of the EU, UK, New Zealand (NZ), Regional Greenhouse Gas Initiative (RGGI), South Korea, California, and China in the Iranian refining sector to incentivize CC integration. The problem was formulated using Stochastic Multi-Objective Mixed-Integer Linear Programming optimization, with K-means Clustering applied to account for ETS CO2 price fluctuations and uncertainties. Results showed intense competition between economic and environmental objectives without ETS regulations, but appropriate ETS implementation could transform this conflict into a cooperative compromise. Under EU and UK scenarios, 60.3% and 67% of CO2 emissions could be avoided with fully covered capture costs, potentially leading to net economic profit through surplus allowance sales. Implementation of the other five ETSs could reduce capture costs by 18–67%, with a 16.4% CO2 avoidance.

Assessing the tradeoffs in emissions, air quality and health benefits from excess power generation due to climate-related policies for the transportation sector

As the transportation sector continues to decarbonize through electrification, there is growing interest in quantifying potential tradeoffs in air pollution and health impacts due to potential excess emissions from the power sector. This study investigates air pollution and health impacts of policy-driven changes in the transportation sector and the associated power generation demand in the Northeast and Mid-Atlantic United States. Five illustrative scenarios were designed to capture the effects of different policies under the first mandatory market-based program to reduce greenhouse gases in the US power sector (Regional Greenhouse Gas Initiative—RGGI) and the Transportation and Climate Initiative (TCI). Considering future power generation with new renewable energy investments to meet demands from decarbonized transportation, the scenarios were framed using: 1. 2030 reference cases for both sectors and a hybrid TCI portfolio, 2. Departure from the reference cases defined by Pennsylvania included or not in RGGI, and 3. Power grid emissions estimated under clean energy standard (CES) policy and hybrid TCI portfolio. While the cross-sectoral policy effect on domain-wide concentrations is modest (max ΔPM2.5 ∼ 0.06 μg m3, ΔNO2 ∼ 0.3 ppbv, ΔO3 ∼ 0.15 ppbv), substantial increases in Ohio and West Virginia were attributed to Pennsylvania joining RGGI. With CES enacted and Pennsylvania in RGGI, significant reductions are seen in average concentrations (max ΔPM2.5 ∼ 1.2 μg m3, ΔNO2 ∼ 1.1 ppbv, ΔO3 ∼ 1.7 ppbv) except for Louisiana and Mississippi with corresponding disbenefits. When focusing exclusively on emissions reductions from transportation, the hybrid TCI portfolio had health benefits of 530 avoided adult deaths, and 46 000 avoided asthma exacerbations. With a ‘business as usual’ power grid, these benefits remain comparable and are mainly driven by NO2, followed by PM2.5 and O3. However, if Pennsylvania joins RGGI, total health benefits and spatial distribution change substantially, with a large portion of adverse health impacts moving from TCI states to Ohio and West Virginia. The overall monetized impact of a CES scenario can substantially exceed the estimated average range of 66–69 Billion US$, depending on the interaction with transportation decarbonization strategies and other drivers of exposure.

Dependence Structure among Carbon Markets around the World: New Evidence from GARCH-Copula Analysis

In this paper, we investigate the dependence structure among carbon markets globally through different copulas. The analysis examines the relationship between carbon prices being traded across different emission trading systems (ETS) worldwide. The novelty of our approach lies in assessing carbon allowances for both futures and spot prices across all the key carbon markets as well as the three Chinese carbon markets for the period from 2011 to 2019 for future prices and the period from 2015 to 2020 for spot prices. The results demonstrate an asymmetric relationship between most carbon markets. A low tail dependence was observed between the European Union ETS and Regional Greenhouse Gas Initiative ETS, California and Quebec carbon markets, while higher tail dependence was found in the Asian carbon markets. Furthermore, carbon markets that have linkage agreements, ongoing cooperation or are geographically close tend to have positive and higher tail dependence. Our findings suggest the formation of regional carbon clubs based on the dependence structure.

A novel deep learning based forecasting model for carbon emissions trading: A comparative analysis of regional markets

This paper proposes a deep learning-based forecasting system for carbon emissions trading in regional markets. The system utilizes a hybrid convolutional neural network (CNN) deep learning algorithm to predict future carbon emission levels and facilitate the trading of carbon emission allowances. The system is compared to traditional methods of forecasting in order to assess the accuracy and performance of the system. In order to enhance the CNN performance, a new optimization algorithm based on bacteria foraging algorithm (BFA) is proposed which uses a modification to make a global search. By leveraging digital twins in the markets, a comparison is conducted using data from three regional carbon markets: the European Union Emissions Trading System, the Regional Greenhouse Gas Initiative, and the China Carbon Market. Results show that the proposed BFA-CNN based deep learning-based system outperforms traditional forecasting methods in terms of accuracy and provides more reliable estimates of future carbon emissions. The proposed system is a novel approach to carbon emissions trading and has the potential to improve the efficiency of regional carbon markets.

Labor reallocation and the regional greenhouse gas initiative

ABSTRACT Policies intended to reduce the amount of greenhouse gas emissions are among the most hotly debated policy problems of our time. Among the concerns raised are that costs will be passed on to consumers and jobs will be lost. We use the introduction and eventual tightening of the Regional Greenhouse Gas Initiative (RGGI), a regional carbon permit system in the Northeastern United States, to measure labor market responses and dynamics following the implementation of a carbon pricing system. We find that implementation of the RGGI and the subsequent tightening of the emissions cap has had no effect on employment or earnings in the utilities sector but increased the rate at which workers flow in and out of jobs. In particular, within the utilities sector, we observe some job destruction and worker separation combined with increased labor reallocation across establishments. This is complemented with small spillover effects yielding positive increases in hiring, worker reallocation and job creation in industries outside of utilities. Furthermore, when we account for the endogeneity of electricity prices we find increased hiring, job creation and worker reallocation rates and a decline in job destruction rates across industries.

In search of climate distress risk

Using the Merton distance to default model we investigate whether a firm's climate risk affects its default (distress) risk. S&P 500 non-financial firms during 2010–2019 are analysed and we employ both corporate carbon footprints and climate risk disclosures in annual filings to measure climate risk. Our results show that climate risk has a negative impact on firms' distance to default. This impact is limited to the disclosure of transition risk in annual filings. In contrast, disclosures of physical or non-specific risk do not affect firm-level default risk, while the impact of corporate carbon footprints is inconsistent but insignificant in most models. We also find that the negative effect of climate transition risk on firms' distance to default is stronger for firms headquartered in states with carbon pricing (California and states covered by the Regional Greenhouse Gas Initiative) and temporarily strengthens because of the Paris Agreement in 2015. However, this ‘Paris’ effect is short-lived and fades away in subsequent years.

Does the US regional greenhouse gas initiative affect green innovation?

This study measures the impact of the implementation of the Regional Greenhouse Gas Initiative (RGGI) on firms’ green innovation initiatives. We used 20 years of panel data from the Fortune 500 list of the US largest companies. Based on DID, a benchmark regression, the RGGI has a significant adverse effect on the green innovation of Fortune 500 companies, and we verified these findings with multiple robustness tests. As we investigate how energy-intensive industries were affected by RGGI, we found that it slowed down green innovation, but it was not statistically significant. This study provides a novel perspective on how the RGGI influences green innovation in firms and how different types of sectors respond to the policy. The findings indicate that the “weak” Porter Hypothesis has not been confirmed in the present carbon trading market (particularly the RGGI) for Fortune 500 firms in the USA. In terms of policy, we believe that a well-covered and differentiated legislation that fosters green innovation while being realistic about the policy’s goal and the firm’s environmental attitude, like emissions reduction through green innovation, is essential.Supplementary InformationThe online version contains supplementary material available at 10.1007/s11356-022-23189-0.

How Does State-Level Carbon Pricing in the United States Affect Industrial Competitiveness?

Pricing carbon emissions from an individual jurisdiction may harm the competitiveness of local firms, causing the leakage of emissions and economic activity to other regions. Past research concentrates on national carbon prices, but the impacts of subnational carbon prices could be more severe due to the openness of regional economies. We specify a flexible model to capture competition between a plant in a state with electric sector carbon pricing and plants in other states or countries without such pricing. Treating energy prices as a proxy for carbon prices, we estimate model parameters using confidential plant-level Census data, 1982–2011. We simulate the effects on manufacturing output and employment of carbon prices covering the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and Mid-Atlantic regions. A carbon price of $10 per metric ton on electricity output reduces employment in the regulated region by 2.1 percent, and raises employment in nearby states by 0.8 percent, although these estimates do not account for revenue recycling in the RGGI region that could mitigate these employment changes. The effects on output are broadly similar. National employment falls just 0.1 percent, suggesting that domestic plants in other states as opposed to foreign facilities gain the most jobs from state or regional carbon pricing.

Environmental justice and power plant emissions in the Regional Greenhouse Gas Initiative states.

Policies to reduce greenhouse gases associated with electricity generation have been a major focus of public policy in the United States, but their implications for achieving environmental justice among historically overburdened communities inappropriately remains a marginal issue. In this study we address research gaps in historical and current ambient air emissions burdens in environmental justice communities from power plants participating in the Regional Greenhouse Gases Initiative (RGGI), the country's first market-based power sector emissions reduction program. We find that in RGGI states the percentage of people of color that live within 0-6.2 miles from power plants is up to 23.5 percent higher than the percent of the white population that lives within those same distance bands, and the percentage of people living in poverty that live within 0-5 miles from power plants is up to 15.3 percent higher than the percent of the population not living in poverty within those same distance bands. More importantly, the transition from coal to natural gas underway before RGGI formally started resulted in large increases in both the number of electric-generating units burning natural gas and total net generation from natural gas in environmental justice communities hosting electric-generating units, compared to other communities. Our findings indicate that power sector carbon mitigation policies' focusing on aggregate emissions reductions have largely benefitted non-environmental justice communities and have not redressed the fundamental problem of disparities in pollutant burdens between EJ and non-EJ communities. These must be directly addressed in climate change and carbon emissions mitigation policy.

The BosWash Infrastructure Biome and Energy System Succession

The BosWash corridor is a megalopolis, or large urbanized region composed of interconnected transportation, infrastructure, physiography, and sociopolitical systems. Previous work has not considered the BosWash corridor as an integrated, holistic ecosystem. Building on the emerging field of infrastructure ecology, the region is conceptualized here as an infrastructure biome, and this concept is applied to the region’s energy transition to a post-fossil fueled heating sector, in analogy to ecosystem succession. In this conception, infrastructure systems are analogous to focal species. A case study for an energy succession from an aging natural gas infrastructure to a carbon-free heating sector is presented, in order to demonstrate the utility of the infrastructure biome framework to address climate and energy challenges facing BosWash communities. Natural gas is a dominant energy source that emits carbon dioxide when burned and methane when leaked along the process chain; therefore, a transition to electricity is widely seen as necessary toward reducing greenhouse gas emissions. Utilizing an infrastructure biome framework for energy policy, a regional gas transition plan akin to the Regional Greenhouse Gas Initiative is generated to harmonize natural gas transition within the BosWash infrastructure biome and resolve conflict arising from a siloed approach to infrastructure management at individual city and state levels. This work generates and utilizes the novel infrastructure biome concept to prescribe a regional energy policy for an element of infrastructure that has not previously been explored at the regional scale—natural gas.

Carbon Pricing in the US: Examining State-Level Policy Support and Federal Resistance

Carbon pricing is a key policy instrument used to steer markets towards the adoption of low-carbon technologies. In the last two decades, several carbon pricing policies have been implemented or debated at the state and federal levels in the US. The Regional Greenhouse Gas Initiative and the California cap-and-trade policy are the two regional policies operational today. While there is no federal policy operational today, several carbon pricing proposals have been introduced in Congress in the last decade. Using the literature on interest group politics and policy entrepreneurship, this article examines the carbon pricing policies at the subnational and federal levels in the US. First, the article explores the evolution of two main regional carbon pricing policies, the Regional Greenhouse Gas Initiative and California cap-and-trade, to identify how interest groups and policy entrepreneurs shaped the design and implementation of the respective policies. Second, the article details the federal carbon pricing policy proposals and bills discussed in the last decade. Third, it examines the factors that limit the prospects of realizing an ambitious federal carbon price for pursuing deep decarbonization of the US economy. The article finds that federal carbon pricing in the US suffers from the lack of any natural and/or consistent constituency to support it through policy development, legislation, and implementation. While interest group politics have been mitigated by good policy entrepreneurship at the subnational level, the lack of policy entrepreneurship and the changing positions of competing interest groups have kept a federal carbon pricing policy from becoming a reality.

Mind your Ps and Qs! Variable allowance supply in the US Regional Greenhouse Gas Initiative

We investigate the new institutional design for the US Regional Greenhouse Gas Initiative (RGGI). The scheme incorporates two allowance reserves that adjust the supply of allowances in the event of unexpectedly high or low allowance demand. These reserves are enacted if the clearing price breaches a predetermined set of trigger prices. Our experiment finds trigger prices act as focal points: the distribution of clearing prices is bimodal and aligns with the trigger prices. We find the existence of focal points can be explained by both the institutional design and subjects’ behavior. Further, decreasing the range between trigger prices increases total revenue but decreases allocative efficiency. The regulation is more sensitive to changes in trigger prices than reserve quantities.

Coalitions in climate mitigation policy re-design processes: The case of the regional greenhouse gas initiative

Using the recently proposed concept of “design coalitions,” this paper analyzes stakeholder participation in a subnational U.S. climate change mitigation policy redesign process. We demonstrate the utility of design coalitions for analyzing policy design processes, contending that it provides an opportunity to examine the understudied “secondary beliefs” of actors as described by the advocacy coalition framework. Our case study consists of an iterative, inductive content analysis of written input to the Regional Greenhouse Gas Initiative’s 2016 policy redesign process. We developed a typology of 12 distinct stakeholder types who coalesced in 19 separate design coalitions, each espousing a stance on one of 11 elements of the policy design. These coalitions were dynamic, with radically different sets of stakeholder types participating simultaneously in many different design coalitions without coordination, usually for their own unique reasons. We observe that, although the updated policy reflected many stakeholder’s stances, their influence was limited by their exclusion from the agenda-setting phase of this policy redesign process. In this critical era of climate mitigation policy proliferation, it is important to develop a better understanding of climate policy design coalitions and how they engage in and influence climate mitigation policy design processes.

Preventing Increased Air Pollution in Pennsylvania’s Environmental Justice Communities

Air pollutants are known to cause serious health impacts, and historically marginalized groups are disproportionately exposed to these risks. Other hazardous pollutants often accompany carbon dioxide emissions during fossil fuel combustion, and therefore reductions in greenhouse gas emissions from climate policy can also improve air quality. However, although these policies may reduce pollution overall, existing programs have often increased local emissions levels – particularly in the most overburdened neighborhoods. The adverse health effects caused by a redistribution of emissions must be considered as Pennsylvania plans to join the Regional Greenhouse Gas Initiative. We recommend the Department of Environmental Protection include an annual impact assessment of their cap-and-trade program on vulnerable communities using both the available carbon dioxide emissions data and additional local air quality measurements.

Emissions and Health Implications of Pennsylvania’s Entry into the Regional Greenhouse Gas Initiative

The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade system targeting CO2 emissions from the electricity sector in the northeastern United States. As a major power producer and carbon emitter, Pennsylvania plans to join RGGI in 2022, which will affect both the carbon market (i.e., RGGI) and the regional electricity market (i.e., PJM). Combining a PJM power system model with a reduced-form model of CO2 emissions abatement from RGGI states that are not in PJM, we find the annual average emissions from power plants in Pennsylvania can be reduced by 40%, 79%, 68%, and 76% for CO2, SO2, NOx, and PM2.5, respectively, during 2022-2030. Then, based on a range of source-specific marginal damage estimates, we find the cumulative monetized health cobenefits to be 17.7 to 40.8 billion USD. However, the reduced emissions and health damages in Pennsylvania are slightly offset by increases in the other states in PJM that do not participate in RGGI. Our study hence highlights the potential cross-state leakage issue that warrants careful consideration in the policy design and implementation process.

Air quality-related health co-benefits from Pennsylvania’s entry into the Regional Greenhouse Gas Initiative (RGGI)

BACKGROUND AND AIM: Climate policies can provide local health co-benefits by simultaneously reducing local and regional air pollutants co-released with greenhouse gas emissions. The Regional Greenhouse Gas Initiative (RGGI) is a regional cap and trade system that seeks to reduce CO₂ emissions from the electric power sector in eleven northeastern and mid-Atlantic states in the United States. Here we focus on Pennsylvania’s anticipated entry into RGGI in 2022. As a major power producer and carbon-emitter in the PJM interconnection (i.e., the Regional Transmission Organization that manages the wholesale electricity market in Pennsylvania and twelve other states), Pennsylvania’s participation affects both the PJM electricity market and the RGGI carbon market. METHODS: By combining a power system model of PJM with a reduced form model of CO₂ emissions abatement from RGGI states that are not in PJM, we first simulate the effects of Pennsylvania’s participation in RGGI on electricity market outcomes, CO₂ emissions, and other local and regional air pollutants. We then use a range of marginal damage estimates derived from reduced-form air pollution models to monetize air quality-related health impacts. RESULTS:Comparing the scenarios with and without Pennsylvania’s participation in RGGI, we find the annual average power sector CO₂ emissions in Pennsylvania to be 40% lower from 2022 to 2030. During the same time period, the annual emissions are 79%, 68% and 76% lower for SO₂, NOx and PM2.5 emissions, respectively. Such a reduction in co-emitted air pollutants leads to cumulative health co-benefits of $17.7 billion to $40.8 billion. However, the reduced emissions and health damages in Pennsylvania are slightly offset by increases in the other states in PJM that do not participate in RGGI. CONCLUSIONS:Our study highlights the large potential for health co-benefits from Pennsylvania’s entry into RGGI, though the cross-state leakage issue requires careful consideration in the policy design and implementation process. KEYWORDS: Air pollution, climate, health co-benefits, policy

Geospatial assessment of the economic opportunity for reforestation in Maryland, USA

Afforestation and reforestation have the potential to provide effective climate mitigation through forest carbon sequestration. Strategic reforestation activities, which account for both carbon sequestration potential (CSP) and economic opportunity, can provide attractive options for policymakers who must manage competing social and environmental goals. In particular, forest carbon pricing can incentivize reforestation on private land, but this may require landholders to forego other profits. Here, we utilize an ambitious geospatial approach to quantify economic opportunities for reforestation in the state of Maryland (USA) based on high-resolution remoting sensing, ecosystem modeling, and economic analysis. Our results identify spatially-explicit areas of economic opportunity where the potential revenue from forest carbon outcompetes the expected profit of existing cropland at the hectare scale. Specifically, we find that under a baseline economic scenario of $20 per ton of carbon (5% rental rate) and decadal average crop profitability, a transition to forest on agricultural land would be more profitable than 23.2% of cropland in Maryland under a 20 year land-use commitment. Accounting for variations in carbon and crop pricing, 5.5%–55.4% of cropland would be immediately outcompeted by expected forest carbon revenue, with the potential for an additional 0.5%–10.6% of outcompeted cropland within 20 years. Under the baseline economic scenario, an annual allocation of $5.8 million towards a carbon rental program could protect 6.93 Tg C (3.4% of the state’s total remaining CSP) on reforested croplands. This moderate yearly cost is equal to 9.7% of Maryland’s average annual auction proceeds from participation in the Regional Greenhouse Gas Initiative (between 2014 and 2018), and 19.3% of the average annual subsidy payments for corn, soy, and wheat allocated over the same period. This methodological approach may be useful for state governments, not-for-profit organizations, or regional climate initiatives interested in identifying strategic areas for reforestation.

Evaluating long-term emission impacts of large-scale electric vehicle deployment in the US using a human-Earth systems model

While large-scale adoption of electric vehicles (EVs) globally would reduce carbon dioxide (CO2) and traditional air pollutant emissions from the transportation sector, emissions from the electric sector, refineries, and potentially other sources would change in response. Here, a multi-sector human-Earth systems model is used to evaluate the net long-term emission implications of large-scale EV adoption in the US over widely differing pathways of the evolution of the electric sector. Our results indicate that high EV adoption would decrease net CO2 emissions through 2050, even for a scenario where all electric sector capacity additions through 2050 are fossil fuel technologies. Greater net CO2 reductions would be realized for scenarios that emphasize renewables or decarbonization of electricity production. Net air pollutant emission changes in 2050 are relatively small compared to expected overall decreases from recent levels to 2050. States participating in the Regional Greenhouse Gas Initiative experience greater CO2 and air pollutant reductions on a percentage basis. These results suggest that coordinated, multi-sector planning can greatly enhance the climate and environmental benefits of EVs. Additional factors are identified that influence the net emission impacts of EVs, including the retirement of coal capacity, refinery operations under reduced gasoline demands, and price-induced fuel switching in residential heating and in the industrial sector.

The impact of climate policy on fossil fuel consumption: Evidence from the Regional Greenhouse Gas Initiative (RGGI)

Climate policies such as carbon taxes or cap-and-trade programs are increasingly used to reduce emissions. In the United States, the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program is used to reduce emissions. In this paper, I use detailed state-level data to estimate the impact of RGGI on coal and natural gas consumption in the electric-power industry. I find the program directly caused coal and natural gas phase-outs within regulated states. Specifically, the program decreased coal and natural gas consumption for electricity generation by 73% and 30%, respectively, within regulated states. However, in nearby, un-regulated states, I find an increase in natural-gas consumption of 237% and a decrease in coal consumption of 7%. As a result, the program reduced carbon dioxide emissions by 4.8 million tons annually in regulated states, but increased carbon dioxide emissions by 3.5 million tons in unregulated states. I also find the program decreased the efficiency of coal-fired and gas-fired plants, which reduces the program's effectiveness for lowering emissions. However, overall, the program reduced carbon dioxide emissions by 1.3 million tons per year.