A Brief Overview of the Regional Greenhouse Gas Initiative (RGGI)
by Hannah Swift
The Regional Greenhouse Gas Initiative, RGGI as it’s better known, is the United States’ first market-based cap and invest program, based in the Northeast. Established in 2005, it has expanded to twelve states in 2022, including Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia. Together, these states are working to reduce their carbon dioxide emissions by setting limits on fossil-fueled electric power generators with capacities equal to or greater than 25 megawatts, which consists of 165 facilities.
What’s Cap and Invest?
The states involved in this program create a cap, which is a regional budget for carbon dioxide emissions. Once this cap is created, the RGGI holds an auction for allowances. Regulated sources can trade and purchase allowances. Carbon dioxide allowances are authorization to emit one short ton of carbon dioxide by an individual source. These regulated sources must purchase allowances in order to emit said greenhouse gasses. These emissions are tracked by RGGIs to ensure that sources are following their emission plans. The sources have a three year control period during which their allowances must be equal to their emissions. The minimum reserve price for each allowance was $2.38 in 2021, although it was sold for $13 per allowance in December of 2021, reaching a record high. At this auction, 27 million carbon dioxide allowances were sold. Offset allowances are projects that reduce greenhouse gas emissions outside of RGGI; if states accept the offset allowances, regulated sources may use these offset allowances.
How Does This Help the Environment?
Every year, the cap for allowances decreases, with the ultimate goal of reducing, and hopefully eliminating, the need to purchase carbon dioxide allowances. Since 2005, RGGI states have reduced power carbon dioxide pollution in the power sector by 50 percent. In the 2009 auction, the emissions cap was set at 188 million short tons of carbon dioxide per year. In the following years, the cap steadily decreased (although the years during which new states joined the RGGI caused the cap to increase proportionately for that state). Each participating state has a different goal for their future in climate accountability. They have made varying commitments, from installments of off-shore wind to expanding the solar arrays. States have also made commitments to hit specific targets for emissions in the coming years.
What’s the Financial Appeal?
In the December 2021 auction, $351.5 million was generated for RGGI states. RGGI calculated an additional economic benefit when including factors such as public health improvements with better air quality and an increase in jobs. States can choose how they want to spend their funds from the auction, although the four main categories are energy efficiency, clean and renewable energy, greenhouse gas reduction, and direct bill assistance. The investments have reduced energy bills and carbon dioxide pollution, while providing jobs in renewable energy and energy efficiency sectors. According to a study done by the Analysis Group, in 2031, the average residential energy bill is expected to be 35 percent lower in RGGI states. These states are able to invest in technology to make energy more efficient and transition to renewable energy, which will help all individuals in the long run.
Are There Other Programs?
As the United States continues to focus on renewable energy and decreasing its carbon emissions, many new initiatives have begun to fight climate change.There are two other major Cap and Trade programs in the US, known as the Midwestern Greenhouse Gas Reduction Accord (MGA) and the Western Climate Initiative. The MGA includes northern states and one Canadian province, and the Western Climate Initiative fights climate change from the western United States.
