Impact of Cap-and-Trade on Connecticut’s Economy

The November 21st edition of HartfordBusiness.com summarizes an analysis of the Northeast’s cap-and-trade system, requiring electric generators to pay for their emissions of carbon dioxide has produced a regional net benefit of $1.6 billion over the past three years, with $189 million accruing to Connecticut.

Under the 10-state Regional Greenhouse Gas Initiative, power plants buy offsets in an auction based on how much carbon dioxide they emit. The money is redistributed to participating states.

A study by the Analysis Group of the initiative’s first three years, starting in 2009, examined how the states spent the auction money, and its impact on the states’ economies vs. the cost to the power generators to participate in the auction.

The study found that Connecticut invested 73% of its funding for energy efficiency; 23% in renewable energy projects; 5% on offsetting air pollution; and 1% on clean energy education for teachers and students. Efficiency reaped large dividends for Connecticut because those measures sliced overall consumption in the state, saving ratepayers money on their utility bills to spend elsewhere. Energy efficiency also lowered wholesale electric rates, as fewer high-cost power generators are needed to meet demand. While power plants in the state paid nearly $175 million, the proceeds resulted in $364 million in total benefits.

The other participating states are Massachusetts, New York, Rhode Island, New Hampshire, New Jersey (which is leaving the initiative), Maine, Vermont, Delaware and Maryland.