The Beginning of the End for RGGI


The Regional Greenhouse Gas Initiative, the 10 Northeast State Carbon market, is on its last legs. New Hampshire House passed a bill that would repeal the state’s membership in the RGGI. This comes behind a year in which New York and New Jersey used their RGGI funds to plug State budget shortfalls. The prime reason for the failure of RGGI is that the funds collected are diverted to the States first, instead of going directly to projects that would have reduced pollution. The main goal is to reduce carbon. The best way to do this is to invest in infrastructure that will accomplish this. Cap and trade needs to be structured so that the funds are used in the most efficient way to reduce the most amount of carbon. Investors in the infrastructure need to have the confidence that the flow of money can not be diverted by politicians before the projects are paid off and the investors have a chance of potentially making a return on investing. RGGI may have worked to fund short term energy efficiency projects like insulation along with energy assistance for the poor. Real projects that make big impacts cost millions of dollars and take 10 to 15 years to pay off. Cap and trade legislation needs to bring confidence to investors in large scale projects. Cap and trade brings the best value to the public since the cheapest and most effective projects will have the highest return thus shutting out wasteful expensive projects.

Flett Exchange established the spot market for RGGI credits in 2008 on its Internet marketplace. During that time we saw little interest from investors due to the structure of the RGGI program. In the future Flett Exchange will support carbon markets that have the ability to sustain projects that require large capital expenditures. The major test will be how the money flows. Investors will not invest if politicians can cut off the returns at any time like we are seeing in RGGI today.

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