The Regional Greenhouse Gas Initiative is far from a perfect GHG bill. It is heavily allocation loaded, focuses only on a small sector of the economy (power plants >25 MW), and doesn’t have any direct carrots to go with sticks.

The good news, such as it is, is that RGGI leaves many details to the discretion of the states, such that they can provide state-level patches to correct those absences in the overarching model. They can also make it worse.

Earlier this week, Connecticut chose the latter. As Restructuring Today ($ub. req’d) reports, Connecticut Gov. Jodi Rell (R) has decided that if the price of carbon gets too high, she should rebate the money back to rate payers to make their energy cheaper.

In other words, rather than letting markets allocate capital in response to the price of carbon, we should hide that price from energy users. Yuck.

Story below the fold.

Connecticut Governor Jodi Rell, R, will require a change to Connecticut’s Regional Greenhouse Gas Initiative (RGGI) rules that provides relief for ratepayers when the sale of emission allowances to generators exceeds certain levels.

“I am insisting that we take this extra step to soften, in any way we possibly can, the unexpected costs that may results from this very important regional initiative,” said Rell.

“This provision is intended to provide real relief at a time when families are struggling just to cover the basics — gasoline, groceries, electricity and heat.”

To that end Rell told Department of Environmental Protection (DEP) to add a provision for consumer rebates to regulations the agency has drafted under RGGI.

“While we are taking historic steps to protect our environment now and for future generations, we must also be mindful of the very real economic pressures that Connecticut businesses and families are facing,” said Rell.

The first auction of RGGI allowances is expected on Sept 10.

Some estimates show allowances will sell for $3 to $5/ton.

Rell’s plan calls for a portion of funds raised through the sales of allocations to be set aside for consumer rebates if the allocation price exceeds $5/ton.

The proposed DEP regulations are before the Legislative Regulations Review Committee, which is scheduled to meet July 22.

Although there are many safeguards built into RGGI, it is critical that Connecticut do even more by adding her cost containment provision to protect ratepayers, said Rell.

In her letter to Commissioner McCarthy, Rell wrote:

“As we all know, the recent sharp escalation of the price of oil is a situation that poses a significant threat to the economic well-being of our state and the welfare of all our residents. We can move this important initiative forward in a way that will ensure — without a doubt — that ratepayers will not be adversely impacted at a time when they can least afford it.”

Connecticut became one of the earliest backers of RGGI in December 2005. Lawmakers approved membership in RGGI in 2007.