The Regional Greenhouse Gas Initiative (RGGI, pronounced "Reggie") is the first mandatory market-based program to reduce greenhouse gas emissions by the United States. RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia to cap and reduce carbon dioxide (CO2) emissions from the power sector. RGGI compliance obligations apply to fossil-fueled power plants 25 megawatts (MW) and larger within the 11-state region. North Carolina's entrance into RGGI has been blocked by the enactment of the state's fiscal year 2023–25 budget. RGGI establishes a regional cap on the amount of CO2 pollution that power plants can emit by issuing a limited number of tradable CO2 allowances. Each allowance represents an authorization for a regulated power plant to emit one short ton of CO2. Individual CO2 budget trading programs in each RGGI state together create a regional market for CO2 allowances. The RGGI states distribute over 90 percent of allowances through quarterly auctions. These allowance auctions generate proceeds, which participating states are able to invest in strategic energy and consumer benefit programs. Programs funded through RGGI have included energy efficiency, clean and renewable energy, greenhouse gas abatement, and direct bill assistance. An initial milestone program's development occurred in 2005, when seven states signed a memorandum of understanding announcing an agreement to implement RGGI. The RGGI states then established individual CO2 budget trading programs, based on the RGGI Model Rule. The first pre-compliance RGGI auction took place in September 2008, and the program became effective on January 1, 2009. The RGGI program is currently in its fifth three-year compliance period, which began January 1, 2021.
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 50% since the program began. 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.
RGGI market The highs and lows of the RGGI market can be largely attributed to declining emissions and allowance oversupply, price controls, policy intervention, and the Clean Power Plan of 2015 by the Obama Administration. RGGI has faced its fair share of obstacles, like any other emissions trading program; one of these is an oversupplied market. The oversupplied market related to RGGI can be traced back to the transition from coal to natural gas as well as a weak economy during the time of implementation. Because RGGI has a low price floor, there is no scarcity of allowances. In the world of carbon offset credits, allowances are shared through a cap-and-trade system to limit harmful emissions and catalyze pollution cuts. This cap-and-trade system is proving successful globally as countries are allowed to set more ambitious climate goals and countries across the world are seeing downward trends in emissions.
Key trends RGGI states have witnessed positive economic activity and a decrease in emissions, electricity prices, and coal generation. According to RGGI's 2018 Electricity Monitoring report, carbon dioxide emissions decreased by 48.3 percent between the 2006 to 2008 period and the 2016 to 2018 period. Electricity generation from coal decreased significantly since the inception of RGGI, while natural gas and renewable generation increased. RGGI also induces a downward pressure on wholesale electricity prices through investments in state-level energy efficiency programs. These programs, along with other associated RGGI measures, have helped provide positive economic impacts in the RGGI region—the RGGI program provided $1.4 billion in net positive economic activity between 2015 and 2017.
RGGI caps The RGGI CO2 cap is the regional cap on power sector emissions. The RGGI states included two interim adjustments to the RGGI cap to account for banked CO2 allowances. The cap declined 2.5 percent each year until 2020. Initial reductions were planned as follows:
The RGGI caps and adjusted caps decreased annually from 2014 to 2020, except in 2020 given the addition of New Jersey.
In 2017, the participating states agreed to further reductions in the regional cap, specifying a 30 percent reduction from 2020 to 2030. The new caps for 2021–2030 are as follows:
The RGGI states 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 allowance prices exceed certain price levels—$13.00 in 2021. In contrast to the CCR, there is an Emissions Containment Reserve (ECR), which serves as the floor and triggers a reduction in allowances if prices drop below the trigger price—$6.00 in 2021. The inclusion of the CCR and ECR ensures emission reduction costs are reasonable.
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