[Editor’s note: This story has been updated, following the governor’s release of a new budget proposal, which doesn’t include a raid on RGGI funds.]
Leaders of the Department of Energy and Environmental Protection and the quasi-public Connecticut Green Bank say a legislative proposal to divert $22 million in pollution cap-and-trade funds to help close a budget deficit will lead to higher electricity costs and carbon emissions in the state.
The Finance, Revenue and Bonding Committee approved a budget package last week that would divert the funds from the Regional Greenhouse Gas Initiative (RGGI). A budget proposal released Tuesday afternoon by Gov. Dannel Malloy, who had indicated that he didn’t support the RGGI raid, left the funds untouched.
The state budget for next fiscal year remains unsettled. The legislative sessions is scheduled to end early next month.
Connecticut is one of nine Northeastern states in the voluntary RGGI program, which first began auctioning carbon allowances to power plants in 2009. Since then, Connecticut has received $160 million from the auction proceeds, which it has used to fund a portion of ratepayer energy-efficiency programs for businesses, municipalities and residential ratepayers. The bulk of the funding from those programs comes from a charge on ratepayer bills.
The raid proposed by the finance committee – $2 million of which would be from the RGGI fund’s current balance – amounts to two-thirds of the $30 million in proceeds expected from RGGI auctions over the next five auctions scheduled through June 2017, according to the nonpartisan Office of Fiscal Analysis.
In an interview, DEEP Deputy Commissioner Katie Scharf Dykes, who is also chair of RGGI Inc., likened the proposal to an energy tax.
“This would drive up energy prices because energy efficiency and renewables help to offset more expensive and dirtier power generation in the energy market,” she said.
Green Bank CEO Bryan Garcia said the proposed diversion would amount to a cut of approximately $4.6 million from the Green Bank’s flagship programs, including a relatively new low-income solar leasing program and C-PACE, which provides incentives for efficiency upgrades to commercial and industrial properties.
But the total impact would be larger, he said, because the Green Bank uses the RGGI funds to leverage private investment, including a $100 million commitment from Hannon Armstrong in December.
Garcia said every dollar the Green Bank spends on its programs leverages $9 in private investment, and that the committee’s proposal could send the wrong message.
“Any time private investors see this sort of activity happening, it just reduces their level of confidence,” he said.
Similar measures have been proposed in New York, according to the Sabin Center for Climate Change Law at Columbia Law School.
