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).
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Contributing Author: Eric Hanson
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