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Abstract
The state of New Jersey (NJ) re-joined Regional Greenhouse Gas Initiative (RGGI) in January 2020, the first mandatory market-based program in the US to reduce greenhouse gas (GHG) emissions. For RGGI’s continued success, it must address the issue of leakage, a situation that results when an action taken to reduce GHG emissions in one area causes an increase in emissions in another area where the rules that govern emissions are not as strict. We analyze the economywide impact of New Jersey’s rejoining RGGI, by developing and uniquely integrating two models – a power system investment and dispatch model, and an economy-wide computable general equilibrium (CGE) model. We analyzed the emission leakage impacts of six different scenarios varying with respect to the sensitivity of some key parameters. For each scenario, we modeled power system operations from 2020 through 2030 for a Reference scenario wherein NJ does not join RGGI and a policy sensitivity scenario in which it does. The results revealed, participation in RGGI results in New Jersey based power producers reducing their CO2 emissions by 45% (8.7 million tons [mt]) between 2020 and 2030. However, the model results also show that emissions from units located outside of New Jersey will increase by 11.6 mt, more than offsetting the reductions realized within New Jersey. Cumulatively, the CGE model predicted an increase in real gross state product (GSP) across all the scenarios when New Jersey joined RGGI with highest in the High CO2 Price scenario (0.82%) and lowest in the Low CO2 Price scenario (0.56%). The model predicted cumulative change in employment across sectors in the Reference scenario, with wind power generation gaining the highest number of jobs by 2030, followed by solar power, and transportation sectors. Overall job loss across other sectors of the economy is relatively small.