SOLUTIONS RGGI

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort by ten northeastern states from Maine to Maryland to reduce global warming pollution from power plants. This landmark program, which comes into effect on January 1, 2009, creates the nation's first mandatory “cap-and-trade” system and market for carbon dioxide (CO2) emissions. RGGI caps the overall level of CO2 emissions allowed from power plants in the region starting in 2009 and continuing through 2014, then reduces emissions 2.5% annually over the next four years, to achieve a 10 percent reduction by 2019.  The other participating states include New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, and Delaware. 

RGGI aims to:

• Initiate a shift in the Northeast’s electricity supply toward more efficient generation and a cleaner, less carbon-intensive fuel mix;
• Achieve this through an auction system in which emissions permits (called "allowances") are limited in number and  generators are required to purchase enough allowances to cover their CO2 emissions during quarterly auctions or in the secondary market; 
• Counter any resulting rate increases (which are predicted to be small) through investment of the allowance auction proceeds in programs to deploy energy efficiency and renewable energy technology;

Allow flexibility by measuring compliance over three year “compliance periods,” i.e., at the end of three years generators must own allowances in an amount equal to their emissions (1 allowance per ton of CO2 emitted).  Generators can also use “offsets” (emissions reductions from activities outside the electric power generating sector) for a small percentage of their obligation.

The rules and procedures for how RGGI will work were painstakingly developed over the past five years by environmental and energy agency staff from each of the states, with extensive input from environmental groups (including UCS), utilities, power plant owners, businesses, and industry.  Each individual state also had to put into place, through legislation and/or regulation, its own necessary legal authorities and procedures. The historic first auction of CO2 emissions allowances took place on September 25, 2008, and was widely considered a great success. Although only six states participated (four had not completed the regulatory processes needed to participate), over 12.5 million allowances were sold at a price of $3.07 each, yielding approximately $38 million for investment in energy efficiency and clean energy development.  The second auction, in which all ten states will participate, takes place December 17.

RGGI represents an important step in tackling emissions reductions in the Northeast and will provide some valuable lessons and a base of experience for the policy debate at the federal level.  Both major Presidential candidates have expressed support for a mandatory cap-and-trade system to reduce global warming pollution, so action on such legislation in Congress is expected in 2009.