North Carolina needs to build a clean and equitable power sector. Here’s how RGGI could be a tool for the job.

This blog was co-authored with William Barber III, Founder and CEO at Rural Beacon Initiative.

solar panels in field

Photo credit: Pexels.

With the recent passage of the Inflation Reduction Act elevating the importance of state implementation of climate action, North Carolina is well-positioned to make critical progress to reduce climate-warming pollution from the electric power sector. Last year, the state took two steps to move towards a cleaner energy future. In July 2021, North Carolina initiated a rulemaking process to join the Regional Greenhouse Gas Initiative (RGGI) — a regional market that caps emissions from the electricity sector across 11 participating states, reinvesting revenues from the sale of allowances into programs that reduce electricity costs and boost the amount of energy generated from clean sources like solar and wind. Then, in October 2021, Governor Roy Cooper signed House Bill 951 (HB 951) into law, calling for a 70% reduction in carbon emissions from the electricity sector by 2030 and carbon neutrality by 2050.

Reaching these important goals demands that North Carolina move further and faster with new programs and intentional policies to drive energy sector transformation and catalyze investment in clean technologies necessary to cut emissions. It also demands that policies better prioritize benefits for environmental justice communities, ensuring that disparate pollutant burden is reduced and that RGGI revenues help advance energy justice by investing in historically disadvantaged communities. Executive Order 246, signed by Governor Cooper earlier this year, acknowledges that “responsible solutions to climate change must equitably reduce GHG emissions, increase community resilience, advance sustainable economic recovery and infrastructure investment efforts, promote public health and health equity, and ensure fair treatment and meaningful engagement in decision-making and implementation.” RGGI, with proper protections, offers a way to do this.

In July, EDF and Rural Beacon Initiative (RBI) released a report evaluating the interplay between the two policies: RGGI and HB 951. The analysis showed that by joining RGGI, paired with a robust rulemaking process that directly prioritizes equitable benefit and adoption of a strong Carbon Plan as required by HB 951, North Carolina can reap the benefits of a multi-pronged approach to decarbonizing the electric sector while ensuring climate benefits are maximized in the near-term, when they are most impactful. 

HB 951 lays the regulatory framework to make this combination of beneficial policies a reality, and RGGI is an important tool that can be leveraged to achieve emissions reductions in a way that is durable, cost-effective and environmentally just.

Here are three key takeaways from the report:

1. RGGI offers the most cost-effective path to reduce power plant emissions.

RGGI supports more efficient and cost-effective pollution reductions compared to the current process because putting a price on carbon gives utilities a choice: reduce your emissions or pay the price for your carbon pollution. By requiring a utility to pay for each ton of carbon emissions, this price reduces the risk that utilities overinvest in polluting facilities that aren’t as helpful for meeting climate goals, which helps protect against stranded assets and higher costs for consumers. Tools that can protect against these unnecessary and unwise investments are particularly relevant presently, as Duke Energy’s proposed Carbon Plan includes significant investment in fossil fuel infrastructure that makes it harder to meet the state’s climate goals and will cost ratepayers down the line. By requiring that Duke consider the cost of the pollution caused by these plants, RGGI could change the calculus underpinning these proposals.

When utilities pay for their pollution through the RGGI program, the proceeds from those payments are reinvested in the form of projects that can be defined – flexibly – by each participating state. North Carolina could, for example, use funds to pay for energy efficiency upgrades for underserved communities, help offset ratepayer power bills and strengthen flood resilience in hard-hit areas of the state. The funds for these projects would come from the bank of funds polluting power plants are paying into, sparing the state from having to use valuable state and federal grant dollars for those expenses.

2. Combining policy approaches increases the certainty and extent of pollution reduction.

The first draft Carbon Plan filed by Duke Energy on May 16, 2022, proposes four portfolios to reduce carbon emissions, with only one achieving the goal to reduce emissions by 70% by the 2030 deadline outlined in HB 951. Because RGGI places an annual cap on total regional emissions, it can act as a backstop against missing this goal if the NC Utilities Commission approved a plan that misses it. The firm, declining cap on emissions set by RGGI means that emissions decline persistently over time, driving greater cumulative emissions reductions – a critical component to limiting the damaging impacts of climate change.

HB 951 only requires carbon reduction plans that hit targets in two out of the next 28 years – 2030 and 2050 – meaning that pollution could plateau or even rise in non-target years.

By pairing the targets of HB 951 with participation in RGGI, North Carolina could reduce cumulative emissions by 2030 by as much as three times that of HB 951 alone. At the same time, the in-state pollution reduction requirements of HB 951 ensure that North Carolina achieves those reductions through investments in homegrown clean energy, rather than relying on purchasing allowances from other states.

3. Advancing economic development and environmental justice are critical components of a successful approach.

RGGI is a proven mechanism to grow economies and reduce power bills. According to research by the Acadia Center, during the first 10 years of the RGGI program, participating states’ economies grew 31% faster than the rest of the country and their electricity bills declined by nearly 6%, all while reducing carbon pollution 90% faster than in the rest of the U.S.

Years of data shows that RGGI spurs investment and job growth in participating states. Prioritizing equitable investment in clean energy and energy efficiency is key to maximizing RGGI’s potential to spur economic growth while creating good paying jobs in clean energy, and to doing so in those communities that most need it.

While HB 951 and RGGI promote reducing carbon pollution and accelerating the transition to a clean economy, emissions-reduction programs must be deliberately and thoughtfully designed to ensure that polluters are unable to simply pay to continue polluting in disproportionately burdened communities — and that substantial benefits flow directly to those communities.

RGGI has brought significant pollution reduction and economic benefits in the aggregate, but a recent study found that the program has yet to ensure these benefits are equitably distributed to environmental justice communities. If North Carolina is to truly see the benefits of pollution reduction policies like RGGI and HB 951, protections for environmental justice communities cannot be assumed — they must be intentionally prioritized in state energy policy.

Many states currently participating in RGGI have taken steps to ensure that RGGI is capable of addressing environmental justice concerns at the same time that it enables emissions reduction and clean energy expansion – North Carolina must do the same.  For example, proceeds from the program can be directed toward improving energy efficiency and lowering energy costs, including for the 1.4 million North Carolinians — a disproportionate percentage of whom are African American or Latino — who struggle to pay their monthly power bills. The state can also explore ways to directly invest auction proceeds in overburdened communities to support economic development, workers and communities impacted by the transition away from fossil fuels, and otherwise reduce environmental injustice, as many other participating states have done.

By joining RGGI, North Carolina could harness a proven mechanism to better position itself to meet the carbon reduction goals of HB 951, which are essential to reducing the state’s emissions to safer levels and preventing the worst impacts of climate change – impacts that North Carolinians are already feeling. At the same time, the state would put itself on a more prosperous path to accelerating economic growth, improving health and lowering energy bills for communities across the state.

Read the full report from EDF and RBI here.

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