Carbon Markets: Foolish Climate Policy that Big Banks Can Love

The most revealing thing about the Regional Greenhouse Gas Initiative (RGGI) might be the location Virginia Governor Ralph Northam chose to hold the final hearing on whether his state would join the regional carbon trading program: The Bank of America building in Richmond. It was a telling move. After all, big financial interests are lining up to capitalize on carbon trading, and Bank of America itself has invested billions in oil and gas development.

Though it is cheered by Northeast politicians and many environmental groups as an effective tool to fight climate change, RGGI does not reduce carbon emissions - no carbon trading system will - and it actually protects and entrenches fossil fuel development, instead of fighting it.

How RGGI Promotes Fracking

RGGI is a multistate agreement to regulate carbon dioxide (CO₂) emissions from large power plants. Proponents of RGGI hail it as bold climate policy that presents a necessary contrast to a White House refusing to even acknowledge climate science. But a closer look at RGGI shows it to be an ineffective means of curtailing harmful emissions, and thus a false solution to climate change.

The unfortunate truth is that RGGI has not driven any carbon reductions in states where it has been implemented; CO₂ caps set by the states have actually been above actual emission rates for most of the program's history. So RGGI provides absolutely no incentive to reduce pollutant loads, rendering it wholly ineffective. Virginia plans on replicating this climate charade by setting its own CO₂ cap at 33 million metric tons, above the 31.8 million metric tons that were actually emitted in 2015 by the state's electric power sector.

Carbon trading schemes like RGGI serve only to rearrange the deck chairs on our rapidly-warming global ship

But wait: RGGI supporters say that carbon emissions have declined in the states that have joined the program. This is a sleight of hand. What these numbers show is another glaring, unfortunate truth: RGGI encourages a shift towards fracked gas. From 2005 to 2015, coal decreased from 21% to 7% of electricity production in RGGI states, while natural gas - a cheaper source of power--increased from 25% to 40%. RGGI incentivizes this shift because CO₂ is the chief greenhouse gas pollutant emitted from coal burning power plants; shifting to natural gas saves them money, and results in much lower CO₂ emissions.

While we should welcome the shift away from coal, the transition to natural gas is, by many accounts, actually worse for the climate. Methane, the chief component of natural gas, has 86 times more heat-trapping capacity than CO₂ in the short term. This is problematic because methane leaks in pipelines, compressor stations, power plants and other gas infrastructure is largely unaccounted for; scientists are still uncovering how much methane is being emitted into the atmosphere, and it seems to be much more than industry monitoring would suggest. What's worse, these emissions are not even considered at all by RGGI. Swapping carbon for methane, as RGGI encourages, is akin to swapping a rifle for a handgun. Both are highly lethal.

And yet, utilities that make a straight-forward business decision to switch from coal to gas get credit for reducing CO₂ emissions. And institutions like Bank of America, which have invested in gas and oil drilling, can rest a little easier knowing power plants in RGGI states are getting incentives to buy from those responsible for oil and gas drilling.

Anti-Fracking Governors Can't Be Pro-RGGI

Despite the failures of RGGI, some are justifying it by pointing out that the program will generate millions of dollars to help expand renewable energy. But that rosy view is at odds with reality. In fact, New Jersey Governor Murphy just put forward a budget that proposes to raid $136 million from funds earmarked for clean energy programs to balance the budget, and New York Governor Andrew Cuomo is planning to raid $23 million from RGGI to balance the budget there.

This is especially galling when you consider that Cuomo and Murphy have positioned themselves as anti-fracking governors. Cuomo championed a ban on fracking in New York following a years-long grassroots campaign, and Governor Murphy recently stood in front of a huge "No Fracking in New Jersey" banner to announce his support for a ban in the Delaware River Basin. This amounts to banning fracking in their own back yards while encouraging the poisoning practice in their neighbors' yards. You cannot be anti-fracking and support RGGI.

The simple truth is this: only curtailing oil and gas production at its source, by transitioning quickly and completely to clean, renewable energy, will forestall climate catastrophe. Carbon trading schemes like RGGI serve only to rearrange the deck chairs on our rapidly-warming global ship, which is in desperate danger of sinking.