Less than two weeks into his first term, New Jersey Governor Phil Murphy signed Executive Order 7, instructing the New Jersey Department of Environmental Protection (NJDEP) and Board of Public Utilities to begin the process of reentering the state into the Regional Greenhouse Gas Initiative (RGGI). The order also directed the NJDEP to create a framework for allocating proceeds from RGGI auctions in the state and overturned a decision by the previous administration that resulted in the 2012 departure of the state from RGGI.

The RGGI, which is currently comprised of nine northeastern states, is a voluntary market-based cap and trade program that was established to reduce CO₂ emissions from the power sector. More specifically, RGGI requires fossil fuel power plants with capacity that exceeds 25 MWs to obtain an allowance for each ton of CO₂ emitted annually. Power plants that operate in RGGI states obtain state-issued allowances (which authorize the emission of one short ton of CO₂ from a regulated source in any participating RGGI state) by purchasing them through quarterly regional auctions or by trading for them on secondary markets. Limited offset allowances are also available by establishing greenhouse gas emissions reduction or carbon sequestration projects outside of the electricity sector (e.g., landfill methane capture, end-use efficiency, forestry, or afforestation).

Key Details

• RGGI is currently comprised of the following nine states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont
• In addition to New Jersey, RGGI may further expand as the governors from Virginia and Pennsylvania have indicated a desire to join RGGI
• States are able to reinvest the proceeds from RGGI’s CO₂ allowance auctions in consumer benefit programs to improve energy efficiency and accelerate the deployment of renewable energy technologies
• Prior to its departure from RGGI in 2012, the National Association of Regulatory Commissioners found that New Jersey’s participation in the program had created approximately $151 million in economic value and almost 1,800 jobs in the state
• In his executive order, Governor Murphy indicated that the decision to leave RGGI in 2012 caused the state to fall behind in its emissions targets and resulted in a loss of an estimated $279 million in revenue from RGGI auction proceeds

More Information

• New Jersey Executive Order 7: Governor Murphy Signs Executive Order Directing New Jersey to Reenter the Regional Greenhouse Gas Initiative
• Utility Dive: New Jersey to Rejoin RGGI in New Executive Order
• Regional Greenhouse Gas Initiative Website: https://rggi.org/
• Insider NJ: Murphy Puts NJ Back into RGGI to Fight Climate Change and Support Green Jobs

This report is part of ScottMadden’s Regulatory Minute series. To view all featured Regulatory Minutes, please click here.

Contributing Author: Eric Hanson