Another RGGI Raid? New York State Senate Proposes Pulling $138 million from the RGGI Fund

NY Solar PanelsJessica Wentz
Associate  Director and Fellow

On March 14, the New York State Senate released a FY 2017 budget proposal that would divert $138 million from the Regional Greenhouse Gas Initiative (RGGI) auction proceeds to the state budget, including $23 million to the general fund, $100 million to subsidize the operations of certain nuclear power plants that are no longer financially viable, and $15 million for a workforce development program.

The amount that the Senate has proposed diverting from the RGGI fund for FY 2017 is more than 80% of the total value of RGGI auction proceeds earned by New York in FY 2016 (which totaled approximately $166 million). As detailed in the RGGI investment plan, these funds are typically used to support energy efficiency and renewable energy programs in New York State. This is not the first time that the legislature has diverted RGGI proceeds for other purposes—it also diverted $90 million in 2009 and $41 million in 2015 to the general fund. If the Senate proposal is approved, the diversions will total $269 million—nearly 30% of the $925.8 million in auction proceeds that have been collected since the program was launched in 2008.

These diversions are inconsistent with New York State regulations aimed at ensuring the proceeds of the auctions would be spent on new programs to further reduce greenhouse gas emissions. The regulations require that the auction proceeds be placed in a segregated funding account that is managed by the New York State Energy Research and Development Authority (NYSERDA) and used “to promote and implement programs for energy efficiency, renewable or non-carbon emitting technologies, and innovative carbon emissions abatement technologies with significant carbon reduction potential.”

Clearly, the diversion of RGGI proceeds to the general budget and for workforce development is at odds with these requirements. And although one could argue that the subsidization of existing nuclear power plants is consistent with the promotion of “non-carbon emitting technologies,” many stakeholders, such as the Alliance for a Green Economy, believe this undermines the purpose of the regulations and NYSERDA’s ability to support new clean energy and energy efficiency programs. As noted in a letter to Governor Cuomo and legislative leaders from a large coalition of environmental groups:

The wise stewardship of RGGI funds has ensured the deployment and use of renewable energy and efficiency initiatives. Utilizing RGGI resources to supplant funding for items in the state budget significantly limits the state’s ability to support existing programs, like Green Jobs Green New York, or new initiatives aimed at incentivizing zero emission vehicles—policy priorities reflected in the budgets advanced by the Legislature.

Of course, the legislature is not bound by executive rules, but legislative leaders should nonetheless consider the underlying purpose of those rules and whether it is in the public interest to use the RGGI proceeds in this manner.

For those unfamiliar with the program – RGGI is an interstate cap and trade program aimed at reducing CO2 emissions from the electric power sector. Nine states currently participate in the initiative: New York, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island and Vermont. Most of the carbon allowances are auctioned and the proceeds of those auctions are typically used to promote energy conservation and renewable energy programs. More information about the program is available here.

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