Introduction

Power Generation, Transmission, and Use

Markets, Regulation, and Oversight

Impacts of Power Generation and Transmission

Looking Ahead

Appendices

CEIR Report Map

PPRP Home

Maryland Power Plants and the Environment (CEIR-18)

5.2.1 Regional Greenhouse Gas Initiative

In 2005, the governors of Delaware, Connecticut, Maine, New Hampshire, New Jersey, New York, and Vermont created the first cap-and-trade program for CO2 in the United States, the Regional Greenhouse Gas Initiative (RGGI). Maryland, as required by the State’s Healthy Air Act of 2006 (HAA), joined RGGI in 2007, the same year as Massachusetts and Rhode Island. Under the RGGI program, total CO2 emissions from fossil fuel-fired electricity generating units with nameplate capacities of 25 MW or greater were capped initially from 2009 through 2014 at 188.1 million tons based on projected 2006-2007 emissions levels. The annual cap was reduced to 165 million tons following New Jersey’s exit from the RGGI program at the end of 2011 and reduced again in 2014 to 91 million tons. Emission reductions of 2.5 percent per year are mandated from 2015 through 2020, for a total reduction of 10 percent. This phased approach was designed to provide regulatory certainty for electricity generators to begin planning for, and investing in, lower-carbon alternatives without creating dramatic electricity price impacts.

Table 5-5 lists the CO2 budget allocations for each RGGI member state. There are 17 power plants in Maryland that are covered by RGGI. Maryland’s 2016 RGGI budget allowance is 14.4 million tons of CO2, or 22 percent of the 2016 budget for the region of 64.6 million tons. Contrary to what was expected when the CO2 state apportionments were negotiated, emissions in the power sector have fallen over the last several years due to plant closures, the economic downturn, mild weather patterns, shifts to natural gas-fired generation, increased generation from renewable energy sources, and increases in conservation and demand response. At the conclusion of the second control period, the RGGI power sector recognized a 40 percent decline in emissions since 2005. Since 2005, emissions from Maryland’s power sector have declined 52 percent, or by 19 million tons of CO2.

A comprehensive program review was conducted in 2012 by RGGI member states via a regional stakeholder process. An updated RGGI Model Rule was published in February 2013, resulting in, among other program clarifications, a 45 percent reduction in the regional emissions cap to 91 million tons starting in 2014. Other revisions include the establishment of interim control period requirements, cost containment reserves to help alleviate spikes in allowance prices, and changes in the handling of offsets as described below. The 2016 Program Review by member states began in late 2015 and will continue throughout 2016.

It should be noted that of the thirteen states (plus the District of Columbia) that are included in whole or in part in the PJM footprint, only Maryland and Delaware are participants in RGGI. To some degree, therefore, “emissions leakage” may occur: reductions in emissions from plants covered in RGGI are offset by emissions from power plants not covered in RGGI. The reason for the potential emissions leakage is that the energy generated from covered plants in Maryland (and Delaware) is subject to the RGGI emissions cap while generation in PJM states not participating in RGGI (e.g., New Jersey) are not subject to the emissions cap. The extent of emissions leakage depends upon numerous factors including energy consumption levels, power plant running-cost differentials, the price of RGGI emission allowances, the level of the emissions caps, and transmission congestion.

Table 5-5 CO2 Emissions from RGGI Sources

State Annual Historic Emissions
2005 - 2008
(million tons of CO2)
Annual RGGI Emissions
(million tons of CO2)
Compliance Period 1
2009-2011
Compliance Period 2
2012-2014
Compliance Period 2
2015
Maryland 32.38 - 37.26 25.57 - 27.96 18.68 -20.60 18.05
Connecticut 8.99 - 11.32 7.02 - 8.53 7.12 - 7.46 8.15
Delaware 7.56 - 8.30 3.71 - 4.30 3.93 - 4.84 3.52
Massachusetts 21.44 - 26.64 15.63 - 19.80 11.79 - 13.68 12.28
Maine 3.37 - 4.59 3.34 - 3.94 2.25 - 2.94 1.78
New Hampshire 7.10 - 8.97 5.53 - 5.90 3.57 - 4.64 3.82
New Jersey 20.60 - 22.07 16.36 - 19.68 N/A 
(See Note A)
N/A 
(See Note A)
New York 48.35 - 62.72 37.70 - 41.95 33.48 - 35.64 32.48
Rhode Island 2.69 - 3.29 3.42 - 3.95 2.77 - 3.74 3.08
Vermont 0.0026 - 0.0078 0.0020 - 0.0065 0.0023 - .000276 0.0012
Original RGGI 10 State Total 153.5 - 184.6 118.56 - 135.74 N/A N/A
Current RGGI 9 State Total 132.9 - 162.5 N/A 86.53 - 92.73 83.16

Source: http://www.rggi.org/

Notes:

(a) New Jersey withdrew from the RGGI program at the end of 2011.
NA – Complete emissions data are not available. Some facilities in Connecticut and Delaware are shown as having incomplete data in the RGGI emissions reporting database.

RGGI Allowance Auctions

Each member state has its own independent CO2 budget trading program. States sell their CO2 allowances in regional auctions with each CO2 allowance representing a limited authorization to emit one ton of CO2. CO2 allowances issued by any state are usable across all state programs, so that the individual state CO2 budget trading programs, in aggregate, form one regional compliance market for CO2 emissions. A power plant within a RGGI state must hold CO2 allowances equal to its emissions to demonstrate compliance at the end of each three-year control period. During the program’s first compliance period from 2009 to 2011, 206 of the 211 power plants subject to RGGI (over 97 percent) met the program’s compliance obligations. For the second compliance period from 2012 to 2014, 161 of the 167 power plants subject to RGGI requirements met their compliance obligations.

Click to OpenAllocation of the Maryland Strategic Energy Fund While any entity may apply to participate in the quarterly auctions, in the first 30 auctions 77 percent of the allowances have been purchased by electric generators or their affiliates. The reserve, or minimum, allowance price was initially set at $1.86 for the September 2008 auction and increases by 2.5 percent each year. For the December 2015 auction, the clearing price was $7.50, well above the established minimum. Allowance clearing prices have ranged from $1.86 to $7.50, as shown in Figure 5-3. In total, RGGI has resulted in $1.7 billion in revenues to the nine member states as of the December 2015 auction. Maryland has raised $474 million (see Table 5-6), the majority of which has been used for low-income energy assistance.

Table 5-6 RGGI Allowance Auctions, 2008-2015

Auction Date Auction Offering Total RGGI Allowances
Sold
Clearing
Price
Maryland Allowances Sold Maryland Revenues (million USD)
Sep-08 Current 12,565,387 $3.07 5,331,781 $16.37
Dec-08 Current 31,505,898 $3.38 5,331,781 $18.02
Mar-09 Current 31,513,765 $3.51 5,331,783 $19.93
Future 2,175,513 $3.05 399,884
Jun-09 Current 30,877,620 $3.23 5,331,782 $18.05
Future 2,172,540 $2.06 399,884
Sep-09 Current 28,408,945 $2.19 5,331,782 $12.42
Future 2,172,540 $1.87 399,884
Dec-09 Current 28,591,698 $2.05 5,331,782 $11.48
Future 2,172,540 $1.86 294,317
Mar-10 Current 40,612,408 $2.07 7,878,873 $16.99
Future 2,137,992 $1.86 368,169
Jun-10 Current 40,685,585 $1.88 7,528,873 $14.85
Future 2,137,993 $1.86 3,767,444
Sep-10 Current 45,595,968 $1.86 5,681,334 $10.99
Future 2,137,992 $1.86 231,008
Dec-10 Current 43,173,648 $1.86 4,316,922 $8.41
Future 2,137,991 $1.86 206,358
Mar-11 Current 41,995,813 $1.89 7,528,873 $14.94
Future 2,144,710 $1.89 376,444
Jun-11 Current 12,537,000 $1.89 2,245,541 $4.60
Future 943,000 $1.89 190,346
Sep-11 Current 7,487,000 $1.89 1,336,077 $2.53
Future 0 -- 0
Dec-11 Current 27,293,000 $1.89 5,669,520 $10.72
Future 0 -- 0
Mar-12 Current 21,559,000 $1.93 4,410,931 $8.51
Jun-12 Current 20,941,000 $1.93 4,458,850 $8.61
Sep-12 Current 24,589,000 $1.93 6,222,230 $12.01
Dec-12 Current 19,774,000 $1.93 5,011,529 $9.67
Mar-13 Current 37,835,405 $2.80 9,579,963 $26.82
Jun-13 Current 38,782,076 $3.21 9,579,963 $30.75
Sep-13 Current 38,409,043 $2.67 8,739,921 $23.34
Dec-13 Current 38,329,378 $3.00 8,739,920 $26.22
Mar-14 Current 23,491,350 $4.00 4,842,487 $19.37
Jun-14 Current 19,062,384 $5.02 3,725,941 $18.70
Sep-14 Current 17,998,687 $4.88 3,725,942 $18.18
Dec-14 Current 18,198,685 $5.21 3,725,942 $19.41
Mar-15 Current 15,272,670 $5.41 3,051,680 $16.51
Jun-15 Current 15,507,571 $5.50 3,053,288 $16.79
Sep-15 Current 23,374,294 $6.02 5,323,721 $32.05
Dec-15 Current 15,374,274 $7.50 3,053,288 $22.90
Total

 

$473.77

Source: RGGI, Inc., website.

Figure 5-3 RGGI Allowance Clearing Prices, 2008-2015

Figure 5-3 - line graph showing price compared to year

RGGI Offsets

The RGGI program allows covered entities to use qualifying offset projects to reduce the total number of allowances they are required to secure. Offset projects or emission credit retirements will be awarded one CO2 offset allowance for every ton of CO2 reduced or sequestered. A source may cover up to 3.3 percent of its CO2 emissions with offset project allowances. Currently, no offset projects have been awarded to offset allowances under RGGI.

Offset projects that currently qualify under the RGGI program are:

  1. Landfill Methane Capture and Destruction – applicable to municipal solid waste landfills that are not subject to New Source Performance Standards (NSPS).
  2. Reduction in Emissions of Sulfur Hexafluoride (SF6) – preventing the release of SF6 to the atmosphere, through capture and storage, recycling, or destruction.
  3. Sequestration of Carbon Due to Afforestation – sequestering carbon through the conversion of land that has been in a non-forested state for at least ten years to a forested condition.
  4. Reduction or Avoidance of CO2 Emissions from Natural Gas, Oil, or Propane End-use Combustion Due to End-use Energy Efficiency – reducing on-site combustion of natural gas, oil, or propane in existing or new commercial or residential buildings through energy efficiency.
  5. Avoided Methane Emissions from Agricultural Manure Management Operations – destroying methane generated by anaerobic digesters and uncontrolled storage of manure or organic food.

The RGGI Model Rule issued in February 2013 details a new “sequestration of carbon due to reforestation, improved forest management or avoided conversion” offset category that may be adopted by states in lieu of the afforestation category described above. The new category accompanies an RGGI U.S. Forests Offset Protocol based mainly on a protocol by the California Air Resources Board.

Maryland Offset Projects

Click to OpenForestry Carbon SequestrationIn Maryland, two additional offset project categories are being pursued, specifically terrestrial sequestration through urban forestry and the restoration of salt marshes. Maryland is promoting the development of programs within urban communities to plant and grow trees, which reduces GHG emissions in two ways. First, CO2 is removed from the atmosphere during the growing of the trees due to an increase in biomass. Second, GHG emissions are avoided through energy conservation, as the trees can provide shade with a natural cooling effect for residences and other buildings in the community. Several State agencies and community groups are interested in pursuing urban forestry projects as an alternative or supplement to other more traditional afforestation projects.

Click to Open“Coastal Blue Carbon” Wetlands Restoration and Conservation OffsetsSalt marshes are prevalent in Maryland and are of critical importance for estuarine ecosystems, such as those associated with the Chesapeake Bay, by serving as habitats for wildlife and buffers to large storms. In addition, salt marsh soils have the capacity to sequester large amounts of CO2 through organic and mineral accretion. Marsh decline, however, is becoming more prevalent throughout the region due to the increase in water levels. Raising the elevation of the marsh beds via supplementation of natural sediment (e.g., depositing clean dredged material) can restore the tidal fluctuations required to support the marsh systems and promote carbon storage. Over the last several years, Maryland’s Power Plant Research Program (PPRP) has assisted with an effort by Restore America’s Estuaries to develop a formal offset protocol for salt marsh systems (see sidebar).

Maryland has great potential for reducing GHG emissions through sequestering carbon in restored wetlands and marshlands around the Chesapeake Bay. Maryland’s Department of Natural Resources (DNR) has identified three focus areas to promote wetland carbon sequestration with the potential to reduce the State’s net emissions by an estimated 0.5 to 0.65 million metric tons CO2 equivalent (CO2e):

Blackwater Tidal Marsh Sequestration Project – PPRP, the U.S. Department of Energy (DOE), and several other partners are collaborating with the University of Maryland to restore up to 20,000 acres of tidal marshes using clean dredged material. Determinations of the carbon storage rate and the effect of management practices on the process, as well as the development of a sampling protocol for CO2 validation in restored marshes, will lead to projects that produce carbon offsets. The restoration project is storing an estimated 24,550 metric tons of carbon each year, a rate above the national average. In addition, the restored marsh will provide habitat for native and migratory birds, terrestrial animals, and aquatic life.

Dorchester County Wetlands Study – PPRP conducted a study of wetlands in Dorchester County to demonstrate the potential carbon sequestration opportunities that may result from protecting and restoring wetlands. Areas for potential restoration were identified within Dorchester County’s extensive coastal marshes. Satellite-derived net primary productivity of the wetlands was used to estimate gross sequestration, and net accumulation was estimated based on the current understanding of carbon dynamics in coastal wetlands.

Sea Level Affection Marshes Model – DNR utilized this model to identify areas known as wetland transition zones, or areas projected to convert into wetlands. These identified areas will become targets for wetland restoration and land conservation efforts to help maintain coastal wetlands into the future.

Allocation of the Maryland Strategic Energy Investment Fund

The RGGI member states have agreed that a minimum of 25 percent of the revenue from each state’s emissions allowances are to be used for consumer benefit or strategic energy purposes. As of the March 2016 auction, Maryland has raised $467.3 million in RGGI proceeds. This revenue is directed to the Maryland Strategic Energy Investment Fund (SEIF), which is administered by MEA. The Maryland legislature has directed MEA to allocate the SEIF as follows:

Forestry Carbon Sequestration

Biological processes can capture and sequester carbon, providing an offset to carbon emissions from fossil fuel power generating facilities. Restoring or planting forests is one approach to enhancing these carbon sequestration services.  One method suggested to protect or expand the natural sequestration services provided by such ecosystems is to create trading markets that place a value on carbon in a way that results in economic incentives and payments for removing carbon from the atmosphere and storing it in biomass.

To understand the requirements and potential of applying such an approach in Maryland, PPRP has been evaluating previously restored forest sites. Data have been collected at the ODEC Patapsco and Seneca Creek restoration sites to measure the carbon content of soils and vegetation, and estimate changes over time. These studies helped develop carbon measurement methodologies and establish baseline values for determining the rate of carbon storage by such systems.

A second initiative has been developing models that can use the field data to project the amount of carbon that will be sequestered over the lifetime of the project (which may be several decades). PPRP has adapted the Graz-Oak Ridge Carbon Accounting Model (GORCAM) for use in terrestrial and wetlands carbon sequestration projects in Maryland. The GORCAM model has been used to characterize the sequestration benefits of different management regimes in Maryland's state-owned forests and to estimate the range of results expected using different mixes of species in the DNR’s carbon sequestration demonstration project. 

At present, these investigations show that the low carbon prices in the experimental trading markets will not stimulate forestry offset projects in Maryland. However, sustainable forestry that selectively harvests high quality timber that can be converted into wood products with long lifetimes can be effective in increasing the amount of carbon removed from the atmosphere by biological processes and subsequently sequestered in stable forms for long periods.

“Coastal Blue Carbon” Wetlands Restoration and Conservation Offsets

Research focusing on “Blue Carbon” in coastal wetland ecosystems suggests that some coastal wetlands can sequester carbon at rates 3 to 5 times greater than temperate forests, making them particularly valuable as carbon sinks that can offset carbon emissions by human activities. Unfortunately, current estimates indicate that 50 percent of U. S. coastal wetlands have been lost since the 1800s, and that coastal wetlands are being lost globally at a rate of 0.7 to 2 percent per year. Efforts to preserve and restore coastal wetlands can now be financed by payments for the additional carbon that the wetlands sequester.

Restore America Estuaries, with support from PPRP, developed a GHG offset category for measuring and crediting climate benefits from a broad range of wetlands, including freshwater tidal coastal wetlands, salt marshes, seagrasses, floodplains, peatlands, and other wetland types. The Wetlands Restoration and Conservation category, which received approval under the Verified Carbon Standard (VCS) in October 2012, allows increased private investment in wetland restoration and conservation projects through the issuance of internationally recognized carbon credits. VCS is the majority holder in the voluntary carbon market with a 58 percent global and U.S. share and is widely considered the leading certification available globally.

In late 2015, VCS approved the specific methodology for implementing tidal wetland and seagrass restoration projects in the Wetlands Restoration and Conservation offset category. The methodology, which is applicable throughout the world, details the procedures required to calculate, report, and verify the GHG reductions from these projects and thereby obtain "carbon credits" that can be traded in the VCS or other carbon markets.