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Regional Greenhouse Gas Initiative

RGGI is a market-based cap and trade program designed to reduce carbon dioxide emissions from electric power plants in the northeastern and mid-Atlantic states.

Background

ENE has been a stakeholder in the Northeast governors’ negotiations concerning RGGI since they began in 2001. ENE took a leadership role among the 24 energy, business and environmental stakeholders...
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Regional Greenhouse Gas Initiative

Program Overview

RGGI is the first mandatory system in the United States to cap and reduce greenhouse gas emissions.  Under RGGI, electric generators with over 25 megawatts (MW) of fossil fuel-based capacity must purchase emissions allowances for every ton of greenhouse gas emitted.  Generators that reduce emissions will be required to purchase fewer allowances, and may sell surplus allowances to generators less able to meet emission reduction targets.  RGGI thus harnesses the market’s capacity to search out the cheapest emissions reductions, and rewards climate-friendly innovation in the electric power sector.

RGGI represents a significant step toward confronting global climate change.  As a whole, the RGGI region, comprising 10 states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont), is the 7th largest global warming polluter in the world.  Reducing emissions in the RGGI region addresses a significant source of greenhouse gases and proves the viability of large cap and trade systems. 

 

Auctions

The inaugural auction of RGGI emissions allowances was held in September 2008, and ongoing quarterly auctions have raised hundreds of millions of dollars for states to invest in clean energy programs.  The majority of this auction revenue is dedicated to energy efficiency programs that save consumers money, reduce emissions, and deliver economic benefits across the region.  For up-to-date information on RGGI auctions and state spending plans, see ENE’s RGGI Auction Tracker.
 

One of RGGI’s most important design precedents is the decision to auction allowances rather than give them away for free, and to invest auction proceeds in energy efficiency.  In addition to saving consumers money on monthly bills, efficiency programs reduce demand for electricity, thus decreasing power plant emissions and making RGGI more cost-effective.  Efficiency savings also boost economic output and job growth in the RGGI region, as consumers spend less money on imported fossil fuels and more money in the local economy.  Based on economic modeling of the impact of energy efficiency investments, ENE has calculated the macroeconomic impacts of RGGI efficiency investments to-date. (See What's New.)

 

Emissions

 

Emissions from power plants covered by the RGGI program have declined significantly since the program was established.  In 2009 regional emissions fell 34% below the ten-state cap, and in 2010 emissions were 27% below the cap.  The decline in emissions was principally caused by reduced generation from fuel oil and coal, and increased generation from natural gas, renewables, and nuclear, as well as by investments in energy efficiency across the region.  See ENE’s RGGI Emissions Trends analysis and report.
 

Year 1 Assessment

 

After the first year of the program ENE conducted its own analysis of the design and implementation of RGGI.  The assessment gives RGGI high marks for successful auctions, strong state investment plans, and decreased emissions.  The Northeast’s model shows that a well designed cap and trade system works, and RGGI sets important precedents such as controlling consumer costs by investing in energy efficiency, having credible offset requirements and ensuring transparency through third-party market monitoring. 

 

Review

 

In order to strengthen the program and ensure that RGGI keeps working to reduce emissions, states must adjust the cap to account for the structural changes in the regional electricity system.

RGGI states have initiated a review of the program to assess its performance to-date, and consider revisions to strengthen the regional accord. The initial stage of the program review is focused on developing projections of future RGGI region emissions. ENE submitted comments and supplemental data on the draft reference case assumptions, as well as subsequent comments on revised assumptions, policy scenarios, and emissions analysis.

ENE Resources Related to RGGI

 

ENE is engaged in efforts to develop a  federal cap and trade policy, building on lessons learned through the design and implementation of RGGI. ENE is also tracking the evolution of other regional cap and trade initiatives, such as the Western Climate Initiative, and has compiled a comparison of key design elements.