Greenhouse Gas Auction Revenues Can Help Cut Maryland Electric Use Significantly, Says Study

Investments might range from direct subsidies helping consumers or businesses buy more energy-efficient appliances to technical assistance retrofitting buildings to public awareness campaigns, though the study does not recommend any specific approach.

Members of the 10-state RGGI group, including Maryland, recently conducted the nation's first carbon emissions auction, raising nearly $40 million in revenues. State officials have begun making plans for allocating that money, with the largest portion to be devoted to efforts to increase energy efficiency.

The new study concludes that:

• Investing a greater share of auction revenues in programs designed to encourage more efficient consumer and commercial use of electricity will produce significantly greater benefits, keeping the state on track to meet its energy-use reduction targets.
• Even though prices may not go down, consumers may see some modest savings because they consume less electricity due to efficiency improvements.
• The overall economic impact on the state of these investments will be positive.

The University of Maryland's Center for Integrative Environmental Research (CIER) produced the study along with a research team from Resources for the Future, The Johns Hopkins University, and Towson University.

"Our findings suggest that state decision makers are heading in the right direction," says University of Maryland public policy professor Matthias Ruth, the principal investigator and director of the Center for Integrative Environmental Research. "Maximizing spending on energy efficiency does pay off in significantly increased benefits and encouraging efficiency accounts for the major part of the state's most recent plans." The Maryland Department of Environment commissioned the study, The Role of Energy Efficiency Spending in Maryland's Implementation of the Regional Greenhouse Gas Initiative, to help the state explore the economic and environmental implications of using RGGI revenue in support of energy efficiency programs, as well as to determine the impact on producers, consumers and other stakeholders. The analysis began prior to last month's auction and the study's findings are not based on its results.

"Our study doesn't prescribe a specific investment strategy for the state, but instead provides a yardstick for measuring the impact of investments in energy efficiency," Ruth adds. "The bottom line is that the revenues from the nation's first greenhouse gas auction can be invested to decrease energy consumption and create a positive overall economic impact, all while providing significant environmental benefits. This research should give officials independent confirmation that they're on solid economic ground."

As a member of the 10-state RGGI pact, the state is allocated an annual budget, or a cap, for carbon dioxide emissions allowances. By auctioning these off to energy producers, the state raises money, some of which must be used to benefit consumers.

Using a series of sophisticated modeling techniques, the research team compared the impact of investing half versus all auction revenues in efficiency improvements against a low-investment baseline of one-quarter. These scenarios assume that Maryland will sell off all of its allowances to producers, rather than giving some away. Auctioning a majority of allowances is the "clear trend" among most RGGI states, the report says.

The full CIER report is available online: http://cier.umd.edu/RGGI/index.html.