EFFICIENCY REQUIRED

The premise behind the Regional Greenhouse Gas Initiative is simple – by putting a price on carbon pollution, utilities will reduce their emissions of the greenhouse gas linked to climate change. Reducing or eliminating the costs of emissions, by giving away carbon allowances, for example, weakens the program, so lawmakers must be careful when writing the rules for Maine’s participation in the initiative.

Earlier this week, Gov. John Baldacci reaffirmed the state’s commitment to RGGI, a 10-state effort to cap emission from power plants that, if successful, would be expanded to other sectors. Like the other states, Gov. Baldacci pledged to auction all of Maine’s carbon allowances, 6 million tons’ worth between $12 million and $30 million depending on the per credit price.

Under RGGI, fossil fuel-fire power plants will cap their greenhouse gas emissions in 2009 and reduce them by 10 percent by 2019. Power plants that are more efficient than required can bank their excess allowances for future use or sell them to plants exceeding their limits.

The Baldacci administration has raised concerns about the paper mills in Jay and Bucksport that produce heat and electricity. The Verso paper mill in Bucksport installed a natural gas boiler in 2000 that produces steam for the mill and electricity for the mill and to be sold on the power grid, while cutting carbon emissions in half. Company officials say it would be hard to make more improvements at the mill to meet the RGGI requirements. Plus, the company can’t pass on all its carbon costs, because it uses some of the electricity it generates itself.

The administration proposes to give these mills allowances to offset their efficiency. The allowances couldn’t be sold but could be used to meet emission reduction requirements, allowing the company to buy fewer allowances than it otherwise would need to. However, the money saved would flow into corporate coffers, likely to be invested in other mills.

Putting most of the money the state receives from the sale of allowances into a fund aimed primarily at efficiency improvements makes more sense. Reducing electricity usage through efficiency costs less than half as much as building new generation facilities to meet demand. Maine’s spending on efficiency improvements is the lowest in New England.

The fund could be used to award grants for efficiency upgrades in manufacturing facilities, offices and homes. Efficiency upgrades – such as new motors or lighting – often pay for themselves within a year. Paper mills could receive these grants, which would lower their costs, while keeping the money and jobs in Maine.

Another complaint about RGGI is that it will increase electricity prices. Because of RGGI, prices are expected to increase by 1 to 3 percent – in the short term. Once many efficiency improvements are made, less electricity will be used and prices could drop, so rebates to large users would be less effective than efficiency grants.

Helping Maine’s electricity producers and users to reduce their carbon emissions through targeted grants and programs, not giveaways, is the most cost-effective way to meet the RGGI goals.