Regional Greenhouse Gas Initiative

Track Record and Benefits

RGGI states have reduced their carbon emissions while still experiencing economic growth. Power sector carbon emissions in the RGGI states have declined by over 40% since 2005, while state economies have grown 8%. Media have reported on RGGI's success as a nationally relevant example showing that economic growth can coincide with pollution reductions. In a report on RGGI, the Congressional Research Service has also said that "experiences in RGGI may be instructive for policymakers seeking to craft a national program.

While multiple factors contribute to emissions trends, a 2015 peer-reviewed study found that RGGI has contributed significantly to the decline in emissions in the nine-state region. Alternate factors considered by the study included state Renewable Portfolio Standard (RPS) programs, economic trends, and natural gas prices.

Other independent reports have analyzed RGGI's economic impact. For example, two reports by the Analysis Group studied RGGI's first and second three-year compliance periods. They found that the effects of RGGI's first three years are generating in $1.6 billion in net economic benefit and 16,000 job-years, and RGGI's second three years are generating $1.3 billion in net economic benefit and 14,700 job-years. These figures do not include co-benefits such as public health improvements or avoided climate change impacts.

A Clean Air Task Force (CATF) study investigated public health benefits arising from the RGGI states' shift to cleaner power generation. The study found that the RGGI states transition to cleaner energy is saving hundreds of lives, preventing thousands of asthma attacks and reducing medical impacts and expenses by billions of dollars.

The RGGI Cap

The RGGI CO₂ cap represents a regional budget for CO₂ emissions from the power sector. The RGGI states include two interim adjustments to the RGGI cap to account for banked CO₂ allowances. The cap declines 2.5 percent each year until 2020.

The RGGI cap and RGGI adjusted cap for the years 2014-2020 are as follows:

2014: RGGI cap is 91,000,000, RGGI adjusted cap is 82,792,336

2015: RGGI cap is 88,725,00, RGGI adjusted cap is 66,833,592

2016: RGGI cap is 86,506,875, RGGI adjusted cap is 64,615,467

2017: RGGI cap is 84,344,203, RGGI adjusted cap is 62.452,795

2018: RGGI cap is 82,235,598, RGGI adjusted cap is 60,344,190

2019: RGGI cap is 80,179,708, RGGI adjusted cap is 58,288,301

2020: RGGI cap is 78,175,215, RGGI adjusted cap is 56,283,807

The RGGI states have also established a Cost Containment Reserve (CCR) of CO₂ allowances that creates a fixed additional supply of CO₂ allowances that are only available for sale if CO₂ allowances prices exceed certain price levels - $4 in 2014, $6 in 2015, $8 in 2016, and $10 in 2017, rising by 2.5 percent each year thereafter. The CCR was 5 million CO₂ allowances in 2014, and 10 million CO₂ allowances each year thereafter.

Compliance

RGGI compliance obligations apply to fossil-fueled power plants 25MW and larger within the RGGI region. As of 2016, there were 163 such covered sources.

Under RGGI, sources are required to possess CO₂ allowances equal to their CO₂ emissions over a three-year control period. A CO₂ allowance represents a limited authorization to emit one ton of CO₂. The first three-year control period took effect on January 1, 2009 and extended through December 31, 2011. The second three-year control period took effect on January 1, 2012 and extended through December 31, 2014. The third three-year period took effect on January 1, 2015 and extends through December 31, 2017.

As of June 2015, 96 percent of regulated power plants had met their compliance obligations for the second control period.

Quarterly Regional Auctions

The first pre-compliance auction of RGGI CO₂ allowances took place in September 2008. Regional auctions are held on a quarterly basis and are conducted using a sealed-bid, uniform price format. Since 2008, the RGGI states have held 31 auctions generating over $2.4 billion in proceeds. Auction clearing prices have ranged from $1.86 to $7.50.

Any party can participate in the RGGI CO₂ allowance auctions, provided they meet qualification requirements, including provision of financial security. Auction rules limit the number of CO₂ allowances that associated entities may purchase in a single auction to 25 percent of the CO₂ allowances offered for sale in that auction.

The RGGI auctions are monitored by an independent market monitor, Potomac Economics. Potomac Economics monitors the RGGI allowance market in order to protect and foster competition, as well as to increase the confidence of participants and the public in the allowance market. The independent market monitor has found no evidence of anti-competitive conduct, and no material concerns regarding the auction process, barriers to participation in the auctions, competitiveness of the auction results, or the competitiveness of the secondary market for RGGI CO₂ allowances.

Market participants can also obtain CO₂ allowances in secondary markets, such as the Intercontinental Exchange (ICE), or in over-the-counter transactions. The independent market monitor provides quarterly reports on the secondary market for RGGI allowances.

Investment of Auction Proceeds

The RGGI states have discretion over how they invest RGGI auction proceeds. They have reinvested proceeds, generated by RGGI auctions in a wide variety of programs. Programs funded through RGGI investment in energy efficiency, renewable energy, direct bill assistance,and greenhouse gas abatement have benefited more than 3.7 million participating households and 17,800 participating businesses. These investments have saved participants money on their energy bills, created jobs, and reduced pollution. Over their lifetime, programs funded by RGGI investments will avoid the use of 11.5 million MWh of electricity, 48.7 million MMBtu of fossil fuel, and the release of 10.3 million short tons of carbon dioxide.

Energy efficiency represents a large portion of RGGI investments. Ultimately, all electricity consumers, not only those who make upgrades, benefit from energy efficiency programs. For example, investing in efficiency programs - such as weatherizing houses - reduces the amount of electricity used. The decrease in electricity demand actually reduces the overall price of electricity. That means the costs go down for everyone, not just someone who installed new, efficient windows.

Program Review

The RGGI participating states have committed to comprehensive, periodic program review to consider program successes, impacts, and design elements. The RGGI states are currently undergoing a 2016 Program Review, which includes regularly scheduled public stakeholder meetings.

The previous RGGI Program Review took place in 2012, and resulted in several updates to the program. These changes included a 45 percent reduction in the RGGI cap, and the introduction of the Cost Containment Reserve (CCR). The CCR and the reduced cap took effect in 2014.

History

In 2003, governors from Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont began discussions to develop a regional cap-and-trade program addressing carbon dioxide emissions from power plants.

On December 20, 2005, seven of those states announced an agreement to implement the Regional Greenhouse Gas Initiative, as outlined in a Memorandum of Understanding (MOU) signed by the Governor's of Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont. The MOU, as amended, provides the outlines of RGGI, including the framework for a Model Rule.

In August 2006, the original seven MOU signatory states published a Model Rule, which provided a regulatory framework for the development of individual state regulatory and/or statutory proposals. The model set of regulations detailed the proposed program, as outlined in the MOU.

In early 2007, Massachusetts and Rhode Island, which had participated in the early development of RGGI, signed the MOU, as did Maryland later that year.

Through statuses or regulations based on the RGGI Model Rule, each state established individual CO₂ Budget Trading Programs. Together, these composed a regional cap and market for allowances. Each state's CO₂ Budget Trading Programs limits emissions of CO₂ from electric power plants, issues CO₂ allowances, and establishes participation in regional CO₂ allowance auctions.

The first compliance period for each state's linked CO₂ Budget Trading Program began January 1, 2009.

On November 29, 2011, New Jersey withdrew from the MOU, effective January 1, 2012. Groups such as Acadia Center have since reported on lost revenue resulting from New Jersey's departure, and argued for renewed participation.