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Regional Greenhouse Gas Initiative

(RGGI) Carbon Dioxide Budget Trading Program

The Regional Greenhouse Gas Initiative (RGGI) is a ten-state cooperative effort to reduce greenhouse gas emissions from electric power plants by means of a cap and trade system. RGGI is the first market-based, mandatory program in the nation whose goal is to reduce greenhouse gas emissions.

Under the RGGI Memorandum of Understanding, the governors of ten Northeastern and Mid-Atlantic States have committed to state regulations that will cap and then reduce the amount of the greenhouse gas carbon dioxide (CO2) that power plants are allowed to emit.

After January 1, 2009, the ten states' rules will require power plants to obtain enough CO2 allowances to cover their emissions during a three-year compliance period. An allowance is a limited authorization under a state's CO2 Budget Trading Program to emit up to one ton of CO2.

To distribute allowances, the RGGI participating states have jointly developed a CO2 Allowance Auction system through which power plants and others can obtain allowances. CO2 Allowance Auctions are held online, with bidders subject to anti-collusion provisions and an independent market monitor reviewing the process to promote fairness and transparency. The second auction was held on December 17, 2008. There will be quarterly auctions thereafter during the first three-year compliance period (January 1, 2009 to December 31, 2011).

The first CO2 Allowance Auction was held in September, 2008. This auction successfully used market forces to set a price on carbon, sending a clear market signal in support of investment in clean energy technologies. Participants from the energy, financial and environmental sectors purchased all available allowances, and the independent market monitor reported that the auction was robust and was administered fairly. The CO2 Budget Trading Program regulations and auctions are providing the first practical model for programs under development in other regions of the U.S., and for national greenhouse gas emission reduction proposals

The CO2 Budget Trading Strategy - Cutting Emissions, Supporting Alternatives

Burning fossil fuel to generate electricity is a large contributor of heat-trapping CO2 to the earth's atmosphere -- New York's power plants, for instance, emit approximately one-quarter of all the CO2 generated in the state. Reducing the amount of CO2 emitted by electric power plants is a necessary part of any climate protection plan.

CO2 Allowance Auction proceeds will support renewable energy and other greenhouse gas reduction technologies. Besides making the region's energy supply more robust, diverse, clean and secure and helping consumers cut energy bills, the strategy will benefit public health, the environment and the economy by improving local air quality, and by promoting forests and g better agricultural manure handling practices (which helps water and air quality in rural areas).

This website provides details on the cap and trade strategy, which includes:

  • A multi-state CO2 emissions budget (cap) that establishes the limit on power plant CO2 emissions in the region at 188 million tons of CO2; the cap will decrease by 2.5 percent each year from 2015 through 2018 for a total reduction of 10 percent
  • A market-based emissions trading system that uses CO2 allowance auctions to permit the market to determine the price for carbon; state control over the number of issued allowances ensures that total emissions in the region will not exceed the cap
  • Support for low-carbon-intensity solutions, including energy efficiency and clean renewable energy, such as solar and wind power

New York's CO2 Budget Trading Program

The science is clear: greenhouse gas emissions are responsible for the warming climate, which poses serious threats to New York's environmental resources and public health. Climate change affects air quality, water quality, fisheries, drinking water supplies, wetlands, forests, wildlife, and agriculture. Flooding from severe weather events and rising sea levels can damage communities and infrastructure in flood plains and along coastlines. Tropical diseases can appear as far north as New York State.

After agreeing on a model rule for participating states to implement their CO2 Budget Trading Programs and establish the CO2 Allowance Auction, New York adopted its regulations. New York's initial CO2 budget is approximately 64 million tons.

In New York, responsibility for implementing the CO2 Budget Trading Program will be shared by three departments of state government: the Department of Environmental Conservation (DEC); the Department of Public Service, and the Energy Research and Development Authority (NYSERDA).

  • DEC has established New York's CO2 Budget Trading Program and its share of the total regional cap through a new rule (6 NYCRR Part 242) and revisions to an existing rule (6 NYCRR Part 200, General Provisions). Part 242 establishes the cap-and-trade provisions.
  • NYSERDA has set up the CO2 Allowance Auction through a new rule (21 NYCRR Part 507). Part 507 establishes administrative procedures for the auction process and provides that proceeds from the sale of the allowances will fund projects and programs for energy efficiency and clean energy technology.

Stakeholder involvement has been crucial to the program's success. New York's stakeholder group, which included energy industry representatives and non-governmental organizations, met 14 times between 2003 and 2007. Public comment was solicited and reviewed on a variety of written documents, including the model cap-and-trade rule. New York also invited comments on a pre-proposal draft of its regulations, as well as two rounds of comments on the proposed rule.


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