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The Regional Greenhouse Gas Initiative

(RGGI) Carbon Dioxide Budget Trading Program

Solor panels on roof in Albany
Solar power is free of greenhouse gas emissions.
Funding from RGGI allowance auctions
is helping build New York's clean energy future
with solar and other renewable energy sources.
(Photo credit: NY Dormitory Authority)

In New York and eight other Northeastern and Middle Atlantic states, the Regional Greenhouse Gas Initiative (RGGI) is promoting a clean-energy future with lower greenhouse gas emissions from electric power generation and savings for electricity customers. RGGI is the first mandatory market-based emissions trading program in the U.S. to reduce carbon dioxide (CO2) emissions and the first anywhere to use the cap-and-invest model for reducing pollution.

RGGI Support of Federal Clean Power Plan

In November 2014, the nine RGGI states sent a letter to EPA in support of its proposed Clean Power Plan:

How RGGI Works

CO2 emissions cap

Together the nine RGGI states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) set a cap for total emissions of CO2 from electric generation facilities in the region. By agreement, the RGGI cap declines over time, gradually tightening emission limits: initiated at 165 million tons per year in 2005, the regional cap in 2014 is 91 million tons. Emissions caps (or CO2 Budgets) in individual RGGI participating states are equal to agreed-upon shares of the regionwide cap.

Emission allowances

Large electric power plants in the RGGI states are required to hold one tradable emissions allowance for each ton of CO2 they emit. The 168 facilities covered by this requirement together produce approximately 95 percent of electric generation CO2 emissions in the region. (Because power plants using renewable and nuclear technologies do not emit CO2, they are not subject to RGGI's emissions allowance requirement.) Power plants acquire emission allowances through quarterly auctions that are jointly sponsored by the participating states, or by purchase from other allowance holders.

Two men putting up insulation inside a framed building
RGGI auction proceeds are supporting building
weatherization and other end-use energy efficiency measures.
(Photo credit: NYSERDA)

Benefits from RGGI

Consumer benefits

RGGI states invest most of the proceeds from the quarterly CO2 emission allowance auctions in consumer benefit programs with emphasis on end-use energy efficiency, renewable energy deployment and greenhouse gas abatement technology development Region-wide. Of the more than $1.5 billion in proceeds since the first auction was held in 2009, approximately 80 percent has been allocated to consumer benefits. New York is investing most of its RGGI proceeds (totaling more than $583 million as of the end of 2013) in energy audits, energy efficiency measures and cleaner energy sources for residential, commercial and industrial buildings.

Lower CO2 emissions

Man testing for leakage with woman looking over shoulder
Most energy efficiency improvements start
with an energy audit. RGGI proceeds
help make audits affordable for New Yorkers.
(Photo credit NYSERDA)

Today in the RGGI region, power sector GHG emissions are more than 40 percent lower than they were when RGGI was initiated in 2005. RGGI's cap is proving an effective accounting method for emission reductions attributable to multiple factors - in this case, efficiency improvements, fuel-switching, a carbon price signal and regulatory predictability. This year, in response to the findings of a scheduled program review, the RGGI participating states reduced the regionwide emissions cap by 45 percent. At 91 million tons, the new cap approximates the amount of actual power plant CO2 emissions, locking in emission reductions already achieved and is positioned to drive further reductions in future years. The reduced cap took effect on January 1, 2014.

Economic strength

It is notable that the RGGI participating states have achieved significant GHG emission reductions while their economies continue to grow. An independent study (Analysis Group link at right) projected positive economic outcomes through the end of the present decade from investment of the first three years' (2009-2011) of RGGI proceeds:

  • $1.6 billion in net economic benefit;
  • $1.1 billion in electricity bill savings for consumers;
  • 16,000 additional job-years; and
  • $765 million retained in local economies due to reduced fossil fuel demand.

Transformative investments of RGGI proceeds also are enhancing New York's green economy, stimulating local economies and creating jobs by removing barriers and promoting carbon reduction practices (e.g. smart grids, clean industries and advanced technologies for power and transportation).

RGGI as a model for action

RGGI requires emission reduction from the electricity system as a whole using a regional framework consistent with the regional basis on which the electric system operates. Under this regional, market-based approach, electric generators can achieve the most cost-effective emission reductions possible. At the same time, RGGI is straightforward to administer. States determine compliance unit-by-unit simply by ascertaining that each regulated source holds allowances sufficient to cover its own emissions. The RGGI states have shown that a system-based cap-and-invest program can achieve cost-effective reductions in regional electricity emissions, facilitate the transition to a lower-emitting and more efficient power sector and also create economic benefits and jobs. RGGI offers a successful model for consideration as the nation establishes guidelines for regulation of power plant CO2 emissions.

More about The Regional Greenhouse Gas Initiative: