Regional Greenhouse Gas Initiative

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont. Together these ten states have capped and will reduce power sector CO₂ emissions 10 percent by 2018.

RGGI is composed of individual CO₂ Budget Trading Programs in each of the ten participating states. Through independent regulations, based on the RGGI Model Rule, each state’s CO₂ Budget Trading Program limits emissions of CO₂ from electric power plants, issues CO₂ allowances and establishes participation in regional CO₂ allowance auctions.

Regulated power plants can use a CO₂ allowance issued by any of the ten participating states to demonstrate compliance with an individual state program. In this manner, the ten state programs, in aggregate, function as a single regional compliance market for CO₂ emissions.

RGGI is the first mandatory, market-based CO₂ emissions reduction program in the United States.

How Cap-and-Trade Works

To reduce emissions of greenhouse gases, the RGGI participating states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont) are using a market-based cap-and-trade approach that includes:

• A multi-state CO₂ emissions budget ("cap") that will decrease gradually until it is 10 percent lower than at the start
• Requirements for fossil fuel-fired electric power generators with a capacity of 25 megawatts (MW) or greater ("regulated sources") to hold allowances equal to their CO₂ emissions over a three-year control period
• Allocating CO₂ allowances through quarterly, regional CO₂ allowance auctions.
• Investing proceeds from the CO₂ allowance auctions in consumer benefit programs to improve energy efficiency and accelerate the deployment of renewable energy technologies
• Allowing offsets (greenhouse gas emissions reduction or carbon sequestration projects outside the electricity sector) to help companies meet their compliance obligations
• An emissions and allowance tracking system to record and track RGGI market and program data, including CO₂ emissions from regulated power plants and CO₂ allowance transactions among market participants

RGGI's phased approach means that reductions in the CO₂ cap will initially be modest, providing predictable market signals and regulatory certainty. Electricity generators will be able to plan for and invest in lower-carbon alternatives and avoid dramatic electricity price impacts.