Regional Greenhouse Gas Initiative Funds Raided By States To Balance Budgets
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CONCORD, N.H. — Two of the 10 Northeast states that agreed to dedicate millions of dollars to reduce carbon emissions and promote green energy have reneged on their promise, instead diverting substantial funds to saving their budgets.
New York and New Jersey over the past year have raided accounts set up under the Regional Greenhouse Gas Initiative, the first mandatory U.S. cap-and-trade program for carbon dioxide. The accounts were created to pay for energy efficiency programs aimed at reducing the region's pollution by 10 percent by 2018.
Citing their example, New Hampshire dipped into its fund in June to help balance its budget.
New York took $90 million last fall – roughly half of its fund; New Jersey zeroed out its fund, taking all $65 million; and New Hampshire, a much smaller state, took $3.1 million in June. In all three states, the money was used to pay the state's bills.
Maryland made no withdrawals but diverted some funding to help the poor pay their electric bills.
Defenders of the raids that say in tough economic times, resources should to be diverted to the most pressing needs.
But critics argue the moves are shortsighted, saying everyone benefits more in the long run from reductions in energy demand from efficiency programs.
RGGI is a 10-state compact begun two years ago to reduce air pollution by large fossil-fuel power plants. Under the country's first mandatory cap-and-trade program, the states agreed to cap the amount of carbon dioxide emitted by power generators to 188 million tons. They require the generators to either reduce pollution or to bid at auction for allowances giving them the right to produce certain amounts of carbon dioxide. Generators whose emissions drop can sell surplus allowances at auction and trade them on commodities markets.
The amounts paid to the three states were to go into special funds to pay for such energy efficient programs as weatherization and rebates on newer appliances.
The allowances are auctioned quarterly with the proceeds – $729 million through September – going back to the states. Each state adopted its own laws and regulations governing the funds, but the compact signed by the states' governors calls for at least 25 percent to be spent on energy programs.
Participating states are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.
Environmental activists want to change the New Jersey Constitution to protect against future raids, saying it should not be left to legislative whim, said Matt Elliott of Environment New Jersey. The state used the money to help close an $11 billion budget hole last spring and could face a similar hole next year.
"New Jersey has now set the precedent that cap and trade creates some kind of cash cow to help balance the state's budget whenever we need a bailout. That's the wrong precedent. It's the wrong message to send," he said.
Jeff Tittel, director of the New Jersey chapter of the Sierra Club, calls the raid "RGGIcide" because RGGI-funded programs were discontinued as a result.
"Unfortunately, once government discovers a new source of money, it's like a potato chip: They keep going back for more," he said.
New Hampshire did not touch its $2.2 million share of the $66 million in proceeds from the latest auction Sept. 8. Elliott said the same is true so far of New Jersey's $10 million share. Rob Sargent, energy program director for Environment America in Boston, said New York so far hasn't tapped its $22 million share, either.
The remaining RGGI states have continued to fund their energy efficiency programs. And New Hampshire diverted federal stimulus funding to pay for initiatives similar to those being paid for with RGGI money.
Erik Kriss, spokesman for the New York state budget division, defended New York's action as necessary to help plug a $9.2 billion deficit in its $80 billion operating budget. No RGGI projects were put on hold, he said.
"Money is swept from time to time from dedicated accounts to generate funds to avoid tax increases and other unsavory things people don't like," he said.
Kriss said the state faces a $315 million deficit this year, but there is no plan to take more money from RGGI.
New Hampshire lawmakers also argued higher spending priorities had to be funded.
"Right now, although I believe the situation is improving, the state is very short of enough funds to meet essential survival services," said retiring New Hampshire House Finance Chairwoman Marjorie Smith.
Democratic Gov. John Lynch, who signed the memorandum with the other states and signed New Hampshire's law, also cited the difficult economic times as reason to raid the fund. He did not rule out tapping the fund again and insisted the overall goal to reduce emissions is being met.
"I don't think the issue is where the money comes from. I think the issue is what are the goals and are we addressing the goals as a state. We're spending a lot more money on energy efficiency projects than we ever have as a state," he said.
Meanwhile, Congress has been unable to deliver a national cap on greenhouse gases to President Barack Obama. The House passed a cap-and-trade plan last year, but Senate Democrats lack the 60 votes needed to overcome Republican delaying tactics. With the House now in Republican control, passage of a federal cap and trade program is even less likely anytime soon.
California regulators last week overwhelmingly approved the nation's most extensive cap-and-trade system, giving owners of power plants, refineries and other major polluters financial incentives to emit fewer greenhouse gases. Enforcement of the new pollution rules begin in 2012.
The Western Climate Initiative, a coalition of seven western states and four Canadian provinces, also is working on a plan to control emissions.
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NORMA LOVE 12/19/10 12:31 PM ET Associated Press