New Jersey Proposes Global Warming Solutions Fund Act Rules for Financial Assistance Programs

May 8, 2009
Client Alert Newsletter May 2009

In the February 17, 2009 New Jersey Register, the New Jersey Department of Environmental Protection ("NJDEP") proposed new rules for the use of funds generated by the auction of Carbon Dioxide ("CO2") allowances under the Regional Greenhouse Gas Initiative ("RGGI") CO2 Budget Trading Program. RGGI requires large power generating facilities within its ten member northeast states to obtain allowances for their CO2 emissions through a periodic auction conducted by RGGI. New Jersey participates in the auction and receives proceeds from the sale of its allowances to the participating utilities.

In New Jersey, the proceeds of the auction sale are to be distributed by the Economic Development Authority ("EDA"), the Board of Public Utilities ("BPU"), and the NJDEP in accordance with the New Jersey Global Warming Solutions Fund Act. Under the Act, sixty percent of the proceeds are to go to EDA for grants and other financial assistance for commercial, industrial, and intuitional entities to support energy efficiency and new efficient, state of the art electric generation facilities. Twenty percent is to be used by the BPU to support programs designed to reduce electricity demand or costs to low and moderate income residential electricity customers. The remaining twenty percent goes to the NDJEP to distribute to (a) municipalities for greenhouse gas ("GHG") reduction efforts (ten percent), and (b) programs for enhancement of forests and tidal marshes to promote carbon sequestration (ten percent).

The proposed regulations establish a priority ranking system for use by EDA, BPU and NJDEP in allocating funds, set forth the criteria for NJDEP to use in determining if an electric generating facility is state of the art, and establish the polices and procedures for NJDEP to allocate funds through its Local Government Greenhouse Gas Reduction Program. For all eligible projects, priority points are assigned depending on the type of benefits from the project, with the net reduction in GHG emissions having the highest number of points by far. Other benefits assigned points include energy savings, carbon sequestration and, co-benefits (e.g., jobs, reducing other air pollutants). Factors such as whether a project has received other funding, how readily its results may be replicated, the expected production of useful data, a demonstrated readiness to proceed, and financial feasibility also are assigned points.

The regulations also provide for the application contents and agency evaluation process, the process for making grant awards and entering into grant agreements, reporting requirements to enable the agency to track progress, and grant conditions. The public comment period closed on April 18, 2009.