State Climate Efforts and Costs

OK, is anyone out there actually surprised by today's New York Times report that some northeast states are diverting revenues from the Regional Greenhouse Gas cap and trade effort?

The Times reported:

In just over two years, the initiative, known as RGGI, has generated more than $729 million for the 10 states that have participated. Each state is supposed to use its share of the money raised to invest in renewable energy and to promote energy efficiency and consumer benefits, like programs that help low-income electricity customers pay their utility bills...

Under RGGI, which is pronounced Reggie, 10 Northeast and Mid-Atlantic states agreed to cap carbon dioxide emissions from electric power plants and charge the plants for the emissions they produce. As an incentive for power plants to pollute less, the states allow the plants that cut their emissions below the cap to sell or trade their excess carbon allowances through online auctions four times a year.

The agreement binds the states to spend at least 25 percent of the money on direct consumer benefits or “strategic” energy purposes.

The participating states have agreed to devote virtually all their RGGI money to energy-use reduction.

In reality, of course, this is just another tax ultimately paid by electricity consumers, including small businesses - whether the revenue is used to close budget gaps or to subsidize various non-economic energy endeavors. Meanwhile, the impact on the environment amounts to nothing. Imagine that, higher taxes to pay for a program that does nothing to accomplish its goal.

Legislation has been proposed in New Jersey to pull out of RGGI. That would be a positive step forward for that state's consumers, businesses and economy.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council