Connecticut’s transportation system – the network of highways, trains, public transit, and walking and biking corridors – is vital to the state’s economy as it facilitates movement of goods and connects people to jobs and opportunities. However, the system needs critical updates to continue to support the state.
At the same time, the transportation system is the largest source (41%) of Connecticut’s greenhouse gas emissions (“GHGs”), which must be reduced for the state to meet its climate commitments.
These two challenges of improving the transportation system and reducing GHGs can be addressed by applying a policy model that has been successfully used to clean up electricity generation and raise funds through emissions reductions.
The Cap and Invest Model
The Regional Greenhouse Gas Initiative (“RGGI”) established in 2009 put a price on carbon emissions from electricity generation and used the proceeds to invest in renewable energy and energy efficiency. Since the program began:
CO2 emissions in the region have dropped by 50%
$4 billion of economic activity has been generated
Tens of thousands of jobs have been created.1
Connecticut was a founding member of this regional cap-and-invest program, and as of 2017 had spent about $201 million of RGGI proceeds on clean energy projects. As of 2014, the latest figures available, RGGI expenditures added about $245 million to Connecticut’s economy, created 2,200 job-years, and helped avoid $13 million in health impacts.2
A similar regional cap-and-invest program could be applied to transportation to raise revenues, reduce emissions, and stimulate the economy. To better understand this opportunity, Acadia Center looked at a scenario that reduced Connecticut’s transportation GHGs 4%, or nearly 4 million metric tons of CO2, by 2030 compared to the baseline scenario from EnergyVision 2030.3 This level of emissions reductions is aligned with Georgetown Climate Center’s estimate for market-based policy compared to existing Federal policies.4
Revenue and Reinvestment Strategies
Based on a $15/ton carbon price,5 the state could generate about $2.5 billion in revenue between 2019-2030 by capping emissions. Connecticut could allocate these funds in many ways to improve transportation and reduce GHGs. For example:
Maximizing transportation GHG reductions by designating 100% of the program proceeds to emissions reduction measures, such as transit expansion, consumer electric vehicle and charging infrastructure rebates, and electrification of medium and heavy-duty vehicles like transit or school buses.
Designating funding for infrastructure maintenance and transit operations, which could also reduce GHGs (by reducing traffic congestion, for example) as an ancillary benefit.
To provide an example of the revenue that could be generated by a cap-and-invest program, Acadia Center examined a 50/50 portfolio, with half of the program proceeds going to maintenance of infrastructure and half going to specific GHG reduction measures (Table 1). This portfolio is only provided as a point of reference, not a recommendation, and it does not include the full suite of activities that could be funded with proceeds.
Table 1: Simplified Reinvestment Portfolio for Connecticut’s Proceeds from Transportation Climate Policy
Benefits from Reinvestment
By examining the benefits of similar transportation expenditures in Connecticut and the U.S., Acadia Center has estimated some of the economic activity and other monetary benefits a 50/50 portfolio could generate (Figure 1). The total benefits from both tracks of spending are estimated at:
$10.3 billion in economic output.
$4.3 billion in added personal income.
$11.6 billion in other benefits including fewer hours spent in traffic (not including the value of reduced GHG emissions).
Over 3,000 long-term jobs created (i.e. not temporary construction jobs).
$86 million in savings from avoided GHG emissions7 avoided costs.
Figure 1: Increased Economic Activity and Other Benefits from Reinvesting Transportation Climate Policy Revenues8
3See Acadia Center’s EnergyVision 2030 Technical Appendix for modeling details. The Baseline scenario includes existing EPA/DOT fuel efficiency standards for medium and heavy-duty vehicles, as well as the existing Corporate Average Fuel Economy standards through 2025.
Connecticut’s high-quality energy efficiency programs help many businesses save money, improve their bottom line, create new jobs that pay well, and compete locally and nationally. Last year alone, over 6,000 in-state businesses benefited from these crucial programs.
Helping businesses cut costly energy waste also helps grow Connecticut’s economy, as each $1 spent by these energy efficiency programs produces $7 in economic growth. That’s an unparalleled return on investment for the Nutmeg State.
Unfortunately, Connecticut took a major step backwards on efficiency near the end of last year. Under extreme fiscal pressure, the General Assembly diverted $127 million in ratepayer funding for efficiency, possibly sacrificing a long-term economic boost of approximately $889 million.
Connecticut now risks falling behind nearly all other states in New England, as most states in the region have achieved more ambitious energy savings targets or are on track to do so by 2019. Connecticut also risks leaving its businesses without good efficiency solutions, making its economic recovery even harder.
The decision to raid energy efficiency funds leaves many businesses in Connecticut concerned.
One such business is Watson Inc, a food manufacturer based in West Haven that employs 300 Connecticut residents. Three years ago, a group of Watson employees volunteered to be on an energy efficiency and sustainability team. With help from the energy efficiency programs, the team developed and executed a plan that led to a 20% reduction in electricity and gas usage.
They also replaced all lighting with LEDs, installed a new properly-sized air compressor, removed many inefficient dust collection systems, and replaced 20 out of 30 air conditioning units with more efficient models. After completing a steam trap survey, they replaced or repaired many components in the high-pressure steam and boiler system. These improvements helped save the company money while reducing its demand on the energy grid.
Another business, Trifecta Ecosystems, Inc., a start-up aquaponic technology and indoor farming company based in Meriden, recently weighed in with the legislature as well. The company described how Connecticut’s efficiency programs helped it immediately capture significant energy savings in a new facility, gain a competitive edge in their new and growing industry, and even hire another full-time employee.
Examples of business support for efficiency abound. Last year, for instance, a number of Connecticut-based companies signed a letter asking the legislature not to divert funds from energy efficiency, as did a national coalition with numerous Connecticut members. More recently Unilever, which has a large facility in Trumbull, shared the following quote to weigh in on the value of investing fully in energy efficiency:
“Unilever believes that energy efficiency is key to keeping businesses like ours thriving. Connecticut will benefit from funding the state’s energy efficiency programs,” said Mark Bescher, Manager of Federal Government Relations and External Affairs at Unilever.
Ball in the legislative court
Legislators and policymakers should consider the repercussions of energy efficiency losses on Connecticut’s business community, as well as its consumers, economy, and environment. These self-inflicted harms include lost jobs, lower economic growth, higher utility bills for ratepayers of all kinds, increased local air pollution, and reduced access to energy efficiency for low-income households.
The good news is that this damage can still be averted if the efficiency fund raid is undone during the current legislative session, which ends on May 9th. Acadia Center will make every effort to restore these vital funds and give our state—and its business community—a chance to achieve a clean and prosperous future.
The proposed 2018 RI State Budget will “raid $12.5 million from ratepayer-funded, cost-effective energy efficiency programs” says nonprofit organizations Acadia Center and People’s Power & Light (PP&L) setting a “dangerous precedent.”
In a press release the two groups “emphasize that these are not state funds, they are rate-payer funds collected specifically to bring much-needed energy savings to all Rhode Islanders. Diverting the funds from the efficiency programs will cost Rhode Island ratepayers more money.”
“Rhode Island’s ratepayer-funded energy efficiency programs have provided $2.3 billion in economic benefits to residents and businesses since 2008, a fourfold return on investment,” said Erika Niedowski, Policy Advocate at Acadia Center. “Rhode Island has worked hard over the last decade to become a national leader on energy efficiency, and diverting these funds would cost ratepayers money and represent a big step backwards for our economy.”
Acadia Center is a non-profit, research and advocacy organization committed to advancing the clean energy future. People’s Power & Light’s mission is to make energy more affordable and environmentally sustainable in New England.
“The RGGI cut is terrible but the energy efficiency program cut would be catastrophic,” said Bill Dornbos, Connecticut state director at the Acadia Center, a clean energy advocacy organization.
This is not Connecticut’s first try at raiding the state’s energy efficiency programs program, doing so successfully in 2003 and 2009. “When something like this happens, contractors and vendors leave Connecticut and go to neighboring states that have strong, fully-funded energy efficiency programs, like Massachusetts and Rhode Island,” Dornbos said. “After two years — and there is no certainty that the money will come back then — we will have to rebuild the program structure.”
“The Senate Republican proposal is a reflection of the new political dynamic,” Dornbos says. “I think [because of] the power sharing agreement in the Senate, proposals from either side should be taken seriously.”
Other states have used RGGI revenue to help plug general budget shortfalls, New York and New Jersey among them, according to Jordan Stutt, a policy analyst with Acadia. “The RGGI [memorandum of understanding] requires all participating states to use at least 25 percent of their auction revenue for consumer benefit or strategic energy purposes, and [Connecticut’s] proposed sweep of RGGI funds would clearly violate that provision,” he explained.
Energy efficiency also pays for itself. Every $1 invested in energy efficiency will save $3.89 in utility bills, according to the Acadia Center. Dornbos said that, over the next two years, the proposed cuts could leave an estimated 24,000 low-income households “without any good solution for how to handle their energy bills.”
“RGGI helps expand customer access to Connecticut’s high-quality energy efficiency programs,” he said. “If we lose RGGI revenue, the energy efficiency programs will have to serve fewer customers. Connecticut will be turning its back on some of the neediest households.”
William Dornbos, Connecticut director and senior attorney at Acadia Center, said Wednesday that the proposal by Senate Republicans to divert $160 million annually from the state’s energy efficiency programs over the next two years “would effectively end Connecticut’s energy efficiency programs for the next two years, and perhaps beyond.”
“Cost-effective energy efficiency is at the center of any modern clean energy strategy, and so this troubling cut would be a needless step backwards for Connecticut, almost certainly crippling the emerging clean energy economy that will be so crucial to our future.” Dornbos said.
The cut being proposed by Republicans represents a two-thirds reduction from current funding levels, he said.
That kind of funding reduction would eliminate incentives available to homeowners to have energy audits done. About 40 companies do the audits around the state, Dornbos said, and “if vendors and contractors have less work, they will begin laying off staff, selling equipment, and losing trained technicians to nearby states with strong, well-funded energy efficiency programs.”
“With previous raids on the energy efficiency programs, we have seen major disruption and job losses in the home performance and efficiency contractor sectors that lingers well past the raids and takes years to overcome,” he said.
Dornbos projected that job reductions attributable to funding cuts in energy efficiency programs could top 12,000 workers in Connecticut. Over time, the cuts might result in the loss of another 28,000 jobs as a result of a reduction in consumers using disposable income created through energy efficiency efforts.
Beyond the jobs that will likely be lost, Connecticut residents of modest means will be more likely to see their energy bills rise if efficiency programs are drastically cut, he said.
“It would deprive many consumers — especially residents with low or fixed incomes — of their best protection against high energy costs,” Dornbos said.
Read the full article from the New Haven Registerhere.