Case Study: Cap and Trade in Massachusetts

Massachusetts has committed itself to achieving a statewide reduction in electricity use of 2.4 per cent annually, and a statewide reduction in natural gas use of 1.15 per cent annually, for three years. This isn't just a goal, it is a mandate written in the Green Communities Act passed by the legislature in 2008, and backed by $1.6 billion in incentives. The Green Communities Act identified energy efficiency as the state's "first fuel," meaning that to the extent possible, energy demand growth will be met by energy efficiency in other places.

The $1.6 billion comes from two places. There are new energy use fees on utility bills to encourage energy efficiency (and to bring the price of wasting energy closer to being in line with the actual cost of wasting energy). To offset the fees, the Act makes free energy audits, rebates for energy efficient appliances, and subsidized weatherization packages available to residents.

But Massachusetts is also auctioning off pollution allowances, some of them in other states with more emissions. How did they swing this? And, more importantly, how can other states do the same?

Massachusetts is part of the first operating regional emissions market in North America, the Regional Greenhouse Gas Initiative, or RGGI. And it is clearly working. In Massachusetts, eighty percent of the auction proceeds will be plowed back into the energy efficiency program. This results in a net decrease in the cost of energy to residents despite the new utility bill fees. The state estimates the net savings across the state will total $6 billion. But that's not all!

Is anyone interested in 25,000 new jobs? That's what they expect the program to create in Massachusetts. The jobs will include energy analysts, energy auditors, mechanical equipment installers, weatherization crews, and a cornucopia of other positions.

So, how can other states do the same?

In an earlier post, Cap and Trade and Massachusetts, I reported that there are already two other regional markets being set up in North America, the Western Climate Initiative (WCI), which encompasses governments extending from Baja California to British Columbia, east to Kansas (if you can believe it), and almost solidly across Canada to Nova Scotia. A smaller market, the Midwestern Greenhouse Gas Reduction Accord, composed of five states and one Canadian province, is close behind in creating its own market.

Taken together, these markets form a continent-spanning mechanism for reducing carbon emissions, increasing energy efficiency, and minimizing the amount of money we export (as regions and as nations) for our energy. These markets are now showing results and setting a precedent for a national system. Membership is still open in each of these markets. It just takes a group of concerned citizens to get their states on board.

Paul Birkeland lives in Seattle, WA, US, and develops Strategic Energy Management Systems for government, commercial, and industrial organizations through Integrated Renewable Energy.

Image courtesy: GreenerWorking.com