1. 1 What is the Role of Federalism in the Context of Greenhouse Gas Regulation? President Jeanne Fox NJ Board of Public Utilities National Association of Regulatory Utility Commissioners November 12, 2007

2. 2 Regional Greenhouse Gas Initiative (RGGI) Overview Collaboration of 10 Northeastern and Mid-Atlantic States –Combined emissions make region the 8 th largest GHG emitter in world Expert input from state government agencies, environmental groups, energy organizations, Independent System Operators, etc. –Over 100 groups submitted over 1,000 pages of comments Extensive multi-year planning and inter-regional process Dec05 Aug06Sep06-Jan08Jan09 MOU w/ 7 States Model Rule IssuedState RulemakingStart Date See http://www.rggi.org/modelrule.htm

3. 3 RGGI’s Initiatives within Federalism Context Establishes Regional Cap on CO2 Power Plant Emissions –Cap-and-trade program on power plant CO2 emissions –Each state receives emissions allowance and cap is applied regionally –Stabilizes CO2 emissions for 6 years –Requires 2.5% annual decline for 4 years after initial transition period Consumer Orientation –Allocates 25% of allowances to support consumer programs Flexibility for States –Individual states determine allocation of remaining 75% Regional program as potential national model

4. 4 RGGI’s Initiatives - continued Flexibility for Generators with “Offsets” – GHG Reductions –Outside the electricity sector –Anywhere in US –But must be accredited through a state agency and signed MOU by that state with RGGI Safety Valve for RGGI’s state agencies –Oversight of Offsets –If price of allowances rise Then more offsets would be allowed –Ensures cost of allowances remains affordable

5. 5 RGGI and 3 Regional ISOs

6. 6 NJ’s Emissions, in C02 equivalent

7. 7 Issues with GHG and RGGI Different Regional Transmission Operators (RTOs) within RGGI Power plants outside RGGI provide power to region –Leakage Other CO2 and GHG sources besides power plants

8. 8 The Perfect is the Enemy of the Good

9. 9 Role of Federalism in Context of Greenhouse Gas Regulation? President Jeanne Fox New Jersey Board of Public Utilities 2 Gateway Center Newark, NJ 07102 973.648.2013 jeanne.fox@bpu.state.nj.us

10. 10 RGGI’s Regional Needs Regional platform for allowance auctions Common Emissions & Allowance Tracking System Credible offsets application and review process