New Hampshire Lawmakers Compromise on Cap-and-Trade

New Hampshire legislators have voted to stay put in the Regional Greenhouse Gas Initiative — at least for now.

The Legislature last week passed a bill that would remove New Hampshire from the New England cap-and-trade agreement (RGGI), but only if two other states leave first. It was the GOP-dominated legislature’s effort to cast a vote against a policy they view as an unnecessary tax on electric ratepayers, without provoking a veto from the Democratic governor.

Under the nine-state pact, power companies bid at auction for permission from each state to release tons of greenhouse gases into the air. Revenue from the auctions is meant to fund projects that help states reach carbon reduction goals, though some states, including New Hampshire, have tapped auction funds to help plug budget gaps. Since September 2008, the auctions have generated about billion in all.

New Hampshire has granted million in auction proceeds to 36 energy efficiency projects and programs, according to RGGI, Inc., a nonprofit group that manages the process. But Republicans in New Hampshire and elsewhere have widely described the cap-and-trade program as a “backdoor tax increase” on consumers, arguing that utility companies simply pass the auction costs on to electric ratepayers.

The pact increased consumer electricity rates about 0.7 percent between 2009 and 2011, according to a study released in November by Analysis Group. But the study also said that increased efficiency because of the pact is expected to drive down rates over time.

This is the second straight year the New Hampshire Legislature has taken steps toward exiting the greenhouse gas accord. Last year, both chambers passed an outright repeal of the state’s involvement, but Governor John Lynch vetoed it.

This year, the House again passed an outright repeal, but brokered a compromise with the Senate, which added the two-state requirement for withdrawal, along with a provision that would send some auction revenue back to utility ratepayers through rebates. “This compromise changes the way the money is distributed and given back to New Hampshire electric ratepayers instead of spent on green pork,” Pete Silva, the House majority leader, said in a statement.

The hope was that Lynch might accept this version. The governor has not said what he will do.

New Hampshire isn’t the first state to consider withdrawing from the pact. Lawmakers in Maine have tried. And last year New Jersey Governor Chris Christie, to the chagrin of the Democratic Legislature, issued a withdrawal order on his own, saying, “RGGI does nothing more than tax electricity, tax our citizens, tax our businesses, with no discernible or measurable impact upon our environment.”

Environmental groups this week filed a lawsuit in state court, alleging Christie broke the law in leaving the pact because he didn’t seek public opinion.

Prices for carbon-use permits have dwindled to rock bottom levels, falling from .07 per ton in September 2008 to .93 today, meaning that state auction revenues have plummeted, too. Critics say the prices serve as evidence that the program isn’t working, insisting they are too low to change industry’s behavior.

In the latest auction, on Wednesday (June 6), power generators bid on just 57 percent of the carbon credits offered, with states taking in a total of about million.

But emissions in the New England Region are falling, too. And cap-and-trade advocates have latched on to that data as evidence the pact is working. Experts say RGGI likely played some role in those falling emissions, but it’s hard to measure the impact amid other market forces. The recession, for instance, has driven down demand for energy, lowering emissions. Also, many people have switched to cheaper natural gas, which emits less carbon and is more plentiful. “Natural gas has changed the complexion of the whole situation,” says Brian Murray, an economic analyst at Duke University.