US: Court ruling could open the door for NJ to join RGGI

04 April 2014 22:01 Source:ICIS

New Jersey could rejoin the Regional Greenhouse Gas Initiative (RGGI) without any new legislation needed to be passed because a court decision will force the state to undergo a rulemaking procedure that could not be vetoed by the Republican governor, legal sources said.

The Superior Court of New Jersey Appellate Division ruled last week that Governor Chris Christie’s move in 2012 to pull the state from the RGGI without following the Administrative Procedure Act (APA), or a set of rules to amend or repeal state laws, was illegal ( see EDCM 27 March 2014 ). Christie pulled the state out of the programme, which regulates emissions from the electricity sector from nine northeastern US states, because he said it was ineffective and raised costs for energy utility customers.

Since pulling the state out of RGGI, Christie has vetoed two bills submitted by Democrats that would have required the state to rejoin the programme. He is expected to veto a third bill that was submitted by earlier this year.

Due to the court’s ruling, New Jersey will be required to go through the APA process in the next 60 days to make the exit from RGGI legal. That process would require the state board to submit a new set of rulemaking, or specific details on how a law should be amended or enforced, to the Office of Administrative Law.

The office would review and publish the proposal in the state registry. The public would be able to comment on the proposal for 60 days before the state agency decides whether to adopt the proposal.

If the agency chooses not to adopt the rulemaking, sources said the law would revert back to the original bill that called for the state to join the carbon programme, meaning the state would join RGGI by default. Christie would be unable to veto any decision by the state agency.

Market participants said it is unclear how the state agency could act, but lawmakers are generally supportive of rejoining the carbon market.

A carbon consultant added Christie could also opt not to fight any such decision by the agency. “There are a lot of reasons why Christie won’t make the same fight he did two years ago. He’ll just go back in,” he said. The consultant said Hurricane Sandy, which caused damage along the state’s coast, could have change his opinion on climate change, and a scandal following the closure of a state bridge has also decreased his political support.

One broker cautioned that New Jersey could stay out of the market for the moment, likely waiting for rules from the Environmental Protection Agency on how to cut emissions from existing power plants, expected to be announced in June.

Traders said if New Jersey returns to the programme it could cause a more bullish market for RGGI allowances, because the state’s compliance entities would likely have few banked allowances and would be entering into a shorter market.

RGGI officials recently renovated the cap-and-trade programme by trimming the cap by 45%, causing allowance prices to rise from $3.00/tonne of CO2 equivalent (tCO2e) in December to the mid-$4.00/tCO2e range in March. Dan X. McGraw

By Dan X. McGraw