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Executive Summary

Nine Northeast states from Delaware to Maine are currently working to develop a regional cap-and-trade system to limit global warming pollution from power plants. The program, known as the Regional Greenhouse Gas Initiative (RGGI), represents one of the first significant efforts to address global warming in the U.S.

Most global warming pollution from electricity generation in the Northeast comes from a handful of power plants, owned by a small number of companies. Cleaning up these plants would significantly reduce the Northeast’s contribution to global warming.

A handful of power plants produce most of the global warming pollution from electricity generation in the Northeast.

• Out of 188 facilities that generate electricity in the Northeast, the top 10 plants produced one-third of all carbon dioxide pollution in the year 2004.

• These 10 plants emitted nearly twice as much carbon dioxide per unit of power generated (1,570 lbs/MWh) as the regional average (850 lbs/MWh).• Over 80 percent of all emissions from electricity generation came from just 50 plants, which produced only 45 percent of the region’s electricity.

A small number of companies own the most polluting power plants.

• The top 10 companies were responsible for more than 60 percent of all global warming pollution from Northeast power plants in 2004 (out of 72 total companies owning power plants). Each produced more than 3.5 million metric tons of carbon dioxide.

• Many of these companies operated carbon-inefficient power plant fleets, generating large amounts of carbon dioxide per unit of energy by using inefficient technology and dirty fuels. Among the top 10 companies, NRG Energy ranked as the most carbon-intensive electricity generator, producing nearly a ton of carbon dioxide per megawatt-hour. NRG plants emitted 9 percent of electric-sector carbon dioxide pollution in the Northeast while generating only 4 percent of the region’s electricity.

• The most polluting companies depend heavily on coal and oil for fuel. Over 50 percent of the global warming pollution from the top 10 companies came from coal and 30 percent came from residual fuel oil.

The worst carbon dioxide emitters are also the largest sources of soot and smog pollution.

• In 2004, the top 50 plants (accounting for 80 percent of power-sector global warming pollution) also emitted:

o 90 percent of the region’s power-sector emissions
of sulfur dioxide, which causes acid rain and soot pollution; and

o 81 percent of the region’s power-sector emissions of nitrogen oxides, which contribute to smog.

• Reducing carbon dioxide pollution from these plants will make it easier for generators to meet increasingly stringent soot and smog pollution limits, yielding public health benefits.An effective power-sector carbon cap must aim to clean up the largest sources of global warming pollution.

In order to be most effective, the carbon dioxide cap that emerges from the RGGI process should create incentives to clean up the dirtiest power plants identified here.

Actions at relatively few plants will make a big impact and enable the region to achieve a meaningful and effective near-term target for reducing carbon dioxide pollution. The following principles should apply to the RGGI model rule:

• The cap should reduce global warming pollution to 25 percent below current levels by 2020, growing tighter over time.

• Reductions must be achieved first and foremost from a mandatory cap on carbon dioxide emitted from fossil-fueled power plants. Emission reductions from outside the regional electricity sector should not be used to achieve compliance with the initial cap.

• The rules should not create a financial windfall for owners of dirty power plants. States should not give emission allowances (that is, permits that allow a facility to emit carbon dioxide) to electricity generators for free. Allowances should be allocated for the benefit of consumers and the public, by providing funding for energy efficiency, renewable energy and consumer rebates.

A strong, well-designed regional carbon cap could provide further momentum in the region’s efforts to achieve a cleaner, more reliable electric system by making greater use of renewable energy and energy efficiency.

A 2004 study by Synapse Energy Economics found that such an approach—if adopted nationally—would reduce carbon dioxide pollution significantly while generating $36 billion annually in savings by 2025.

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