Compare ETS
Use this function to compare the design elements and characteristics of up to three ETSs from around the world.
USA - Regional Greenhouse Gas Initiative (RGGI)
General Information
The Regional Greenhouse Gas Initiative (RGGI) launched in 2009 and is the first mandatory GHG ETS in the United States. It started operating with ten states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont). RGGI’s development was based on the “2005 RGGI Memorandum of Understanding” (MOU) and on the “2006 RGGI Model Rule”. Through statutes or regulations based on the Model Rule, each state then established individual CO2 budget trading programs. New Jersey withdrew from RGGI at the end of the first phase, or “control period” (see ‘Compliance’ section), in December 2011 and later rejoined in 2020. Virginia joined RGGI in 2021 but left in 2023.*
RGGI covers power sector emissions in participating states. In 2020, it covered around 14% of the aggregate participant states’ emissions; in 2021, 228 facilities were covered by the state regulations. The aggregate cap will decrease by 30% compared to 2020 between 2021 and 2030. Under the ETS, covered entities must surrender allowances for all their covered emissions. Covered entities obtain most of their allowances through regular auctions, while some states have “set-aside” accounts from which they may transfer a limited number of allowances to entities’ compliance accounts.
RGGI has undergone two review processes that updated the Model Rule and enshrined tighter caps and adjustments to system design. RGGI’s third review process is currently ongoing.
* A Virgina county circuit court deemed the state’s RGGI exit unlawful in November 2024, casting uncertainty over the state’s official withdrawal.
The RGGI states initiated the Third Program Review in summer 2021 to analyze the program’s successes, impacts, potential additional reductions to the cap post-2030, and other design elements.
In September 2024, the RGGI states released a new exploratory scenario with a higher annual base cap reduction from 2027 to 2033, aligned with a zero-by-2035 cap trajectory, with the trajectory decline lessening to a zero-by-2040 decline rate between 2033 and 2037. The scenario also proposed increasing the cost containment reserve (CCR) to 10.66 MtCO2 (11.75 million short tons CO2) annually, with an additional CCR of the same size available at a higher trigger price.
The RGGI states received stakeholder feedback on the latest exploratory scenario in October 2024, and Model Rule updates are ongoing.
Virginia repealed its CO2 Budget Trading Program following executive action started by the state’s administration in 2022 and thus stopped participating in RGGI in December 2023. However, a Virgina county circuit court in November 2024 deemed the repeal unlawful by, casting uncertainty over the state’s official withdrawal.
Emissions & Targets
717.7 MtCO2e (2022)*
* This value includes Virginia but not Pennsylvania. Values presented here are taken from the “Inventory of U.S. Greenhouse Gas Emissions and Sinks by State” by the Environmental Protection Agency (EPA, available here), aggregated for the RGGI states. While each state publishes official inventory data and the values published by the EPA should not be viewed as official state data, the EPA estimates are presented here to ensure the methodological consistency of data collection and aggregation for inventory categories across RGGI states, as well as to ensure a common reporting year in the data. There may be differences between the EPA estimates and the official state inventories.
By 2030: 30% reduction in power sector emissions compared to the 2020 CO2 emissions cap (“2017 Model Rule”)
Note: Participating states have their own emission targets; economy-wide targets are not defined at the level of RGGI.
Average auction price: USD 18.06
Size & Phases
FIRST PHASE: Three years (2009 to 2011)
SECOND PHASE: Three years (2012 to 2014)
THIRD PHASE: Three years (2015 to 2017)
FOURTH PHASE: Three years (2018 to 2020)
FIFTH PHASE: Three years (2021 to 2023)
SIXTH PHASE: Three years (2024 to 2026)
A cap limits the total emissions allowed in the system. A cap trajectory until 2030 has been set.
Phases in RGGI are also known as “control periods”.
PHASE 1: 564 million short tons CO2 or 512 MtCO2 (188 million short tons CO2 or 171 MtCO2 per year)
PHASE 2: 413 million short tons CO2 or 374 MtCO2
2012 and 2013: 165 million short tons CO2 or 150 MtCO2 per year
2014: 83 million short tons CO2 or 75 MtCO2
PHASE 3: 194 million short tons CO2 or 176 MtCO2
2015:67 million short tons CO2 or 61 MtCO2
2016:65 million short tons CO2 or 59 MtCO2
2017:62 million short tons CO2 or 57 MtCO2
PHASE 4: 193 million short tons CO2 or 175 MtCO2
2018:60 million short tons CO2 or 55 MtCO2
2019:58 million short tons CO2 or 53 MtCO2
2020:74 million short tons CO2 or 67 MtCO2
PHASE 5:* 291 million short tons CO2 or 264 MtCO2
2021:101 million short tons CO2 or 91 MtCO2
2022:97 million short tons CO2 or 88 MtCO2
2023:93 million short tons CO2 or 85 MtCO2
PHASE 6:**
2024: 69 million short tons CO2 or 63 MtCO2
By 2012, verified emissions under RGGI were more than 40% below the cap, so the states tightened the cap in 2014. There was a 2.5% annual reduction factor from 2015 through 2018. The revised regulations extended the 2.5% annual reduction factor through 2020.
The RGGI states further adjusted the caps between 2014 and 2020 to account for banked CO2 allowances from the first and second phases. The annual reduction factor between 2021 and 2030 as set out in the 2017 Model Rule is ~3% of the 2020 cap.
The caps above include New Jersey from 2020 and Virginia from 2021, but the latter only until 2023.
* These values do not include Pennsylvania.
** These values do not include Pennsylvania nor Virginia.
SECTORS: Fossil fuel electric generating units (i.e., fossil fuel-fired stationary boilers, combustion turbines, or combined cycle systems). Sources include governmental, institutional, commercial, or industrial structures, installations, plants, buildings, or facilities that emit or have the potential to emit any air pollutant that include one or more units.
INCLUSION THRESHOLDS: Most RGGI states cover units with capacity equal to or greater than 25 MW.
In New York, since January 2021, the program applies to power plants that have nameplate capacity equal to or above 15 MW and reside at a covered generating unit or near two or more units of the same source.
Point source (power sector)
222 (current control period)
Allowance Allocation & Revenue
Auctioning: CO2 allowances issued by each RGGI state are distributed through quarterly auctions. States hold a limited amount in “set-aside” accounts and distribute them according to state-specific regulations.
Of the 69.4 million 2024 allowances (after the adjustment for banked allowances), 91% were sold at auction. The remainder were either transferred from state set-aside accounts, retired, or remained in set-aside accounts. No offset allowances were awarded. Additionally, 8.4 million allowances were sold from the cost containment reserve (see ‘Market Stability Provisions’ section).
USD 8.6 billion since the beginning of the program
USD 1.5 billion in 2024
Revenues from the quarterly auctions are returned to the RGGI states and have been primarily invested in the following consumer benefit programs: energy efficiency, direct bill assistance, beneficial electrification, GHG abatement, and clean and renewable energy. A report released in July 2024 found that the direct lifetime benefits of RGGI investments made in 2022 are projected to avoid 7.5 million short tons of CO2 (6.8 MtCO2) and return approximately USD 1.8 billion in lifetime energy bill savings to 246,000 households and over 2,600 businesses that participated in programs funded by RGGI proceeds.
The distribution of RGGI investments in 2022 was: energy efficiency (49%); direct bill assistance (21%); beneficial electrification* (14%); clean and renewable energy (7%); and GHG abatement and climate change adaptation** (3%).
* Programs implementing or facilitating replacement of fossil fuel use with electric power.
** Diverse programs, including the promotion of technology, research, and development programs, climate change policy research, coastal resilience, and flood preparedness programs.
Flexibility & Linking
Banking is allowed without restrictions. Current regulations include provisions to adjust the cap to address the aggregate bank, so that allowances available for auction are reduced by the number of allowances not used for compliance in previous control periods (see also ‘Cap’ section above). The RGGI states are currently implementing the third adjustment for banked allowances, which runs until 2025. As part of the RGGI review process, the states are considering whether to address or adjust for banked allowances into the future if a bank of surplus allowances remains in circulation after 2025.
Borrowing is not allowed.
The use of offsets is allowed.
53,506 offset allowances have been awardedduring RGGI’s time of operation, all of which were from a 2017 landfill methane capture and destruction project.
QUALITATIVE LIMIT: Currently, the program allows offset credits from three offset types located in RGGI states:
- landfill methane capture and destruction;
- sequestration of carbon due to reforestation, improved forest management, or avoided conversion; and
- avoidance of methane emissions from agricultural manure management operations.
Some states have discontinued specific offset protocols, but all accept offset allowances issued by any participating state. To date, only one offset project (landfill methane capture and destruction) has been approved under RGGI.
QUANTITATIVE LIMIT: 3.3% of an entity’s liability may be covered by offset credits. This share will remain unchanged between 2021 and 2030.
Between the first and the fourth control periods (2009 to 2020), no CO2 offset allowances were deducted. As of the 2022 interim compliance summary report, no CO2 offset allowances had been deducted in the fifth control period (2021 to 2023).
RGGI is a cooperative effort between participating states. Each state establishes an individual CO2 budget trading program based on the RGGI Model Rule. Covered sources in each participating state can surrender allowances issued by any participating state for compliance and participating states use joint auctions.
State-level ETS: Massachusetts Limits on Emissions from Electricity Generators
State-level ETSs are also being considered or developed in the following RGGI states: Maryland, New York, Vermont
Domestic crediting mechanism: RGGI Crediting Mechanism
Compliance
Three years.
Compliance is evaluated at the end of each three-year phase (control period). From the third phase, covered entities must surrender allowances corresponding to 50% of their verified emissions in each of the first two years of a phase. They must cover 100% of the remaining allowances at the end of the three-year phase.
As part of the third RGGI review process, RGGI states are considering whether to modify the control period so that covered entities need to surrender allowances for 100% of their regulated emissions every year.
MONITORING: Operators must comply with all monitoring and recordkeeping requirements laid out in the Model Rule.
REPORTING: CO2 monitoring reports must be submitted quarterly.
VERIFICATION: Emission data reports and their underlying data are required to undergo periodic quality assurance and quality control procedures in accordance with US Environmental Protection Authority (EPA) regulations.
FRAMEWORK: Emissions data are recorded in the US EPA’s Clean Air Markets Division database in accordance with state CO2 budget trading program regulations and agency regulations. Provisions are based on the US EPA monitoring provisions. Data are then automatically transferred to the electronic platform of the RGGI CO2 Allowance Tracking System (COATS), which is publicly accessible.
In cases of excess emissions (i.e., if entities do not surrender all required allowances by the deadline), allowances equivalent to three times the amount of excess emissions must be surrendered. Furthermore, covered entities may also be subject to specific penalties imposed by the RGGI state where it is located.
Market Regulation
MARKET PARTICIPATION: Compliance entities, non-compliance entities (domestic and international), and individuals can participate if they provide a financial security.
MARKET TYPES:
Primary: Most CO2 allowances issued by each RGGI state are distributed through quarterly regional auctions. The RGGI COATS records and tracks data for each state’s CO2 budget trading program, including the transfer of allowances offered for sale by the states and purchased by the winning qualified bidders in the quarterly auctions. Auctions are open to all parties with financial security, with a maximum bid of 25% of the volume on offer per sale. There is no allowance holding limit. Auctions are managed by Enel X.
Secondary: The secondary market for RGGI CO2 allowances comprises the trading of physical allowances and financial derivatives, including futures, forwards, call options, and put options. RGGI COATS facilitates participation in the secondary market and enables the public to view and download RGGI data and CO2 allowance market activity reports. Financial derivatives are traded on the ICE platform.
Potomac Economics, an independent market monitor, monitors the performance and efficiency of the RGGI CO2 allowance auctions and the secondary CO2 allowance market.
LEGAL STATUS OF ALLOWANCES: The RGGI Model Rule specifies that allowances are limited authorizations by the participating state’s regulatory agencies to emit up to one short ton of CO2.
AUCTION PRICE FLOOR
Instrument type: Price-based instrument
Functioning: Auctions have a price floor of USD 2.62 per short ton in 2025, increasing by 2.5% per year (to reflect inflation).
COST CONTAINMENT RESERVE (CCR)
Instrument type: Price-based instrument
Functioning: Since 2014, RGGI has operated with a CCR, consisting of a number of allowances in addition to the cap held in reserve and only released to the market if certain trigger prices are reached. Beginning in 2021, allowances provided within the CCR are equal to 10% of the regional cap. The trigger price is USD 17.03 in 2025 and increases by 7% per year. It had previously increased by 2.5% annually between 2017 and 2020, from a starting value of USD 10.
The CCR was triggered in 2014 and 2015, when all 15 million allowances it contained were sold. The CCR was also triggered in the last quarterly auction of 2021, where 3.9 million of the available 11.9 million allowances were sold. It was triggered again in the final auction of 2023, with 5.6 million of the 11.2 million CCR units on offer sold. The CCR was also triggered in March 2024, when all 8.4 million allowances it contained were sold.
EMISSIONS CONTAINMENT RESERVE (ECR)
INSTRUMENT TYPE: Price-based instrument
Functioning: In 2021, RGGI started implementing an ECR, which withholds allowances from auction if certain trigger prices are reached, up to an annual withholding limit of 10% of the emission budgets (i.e., the share of each state in the regional cap) of participating states. Allowances withheld will not be re-offered for sale, effectively adjusting the cap downward. In 2025, the trigger price is USD 7.86, increasing by 7% per year. Maine and New Hampshire are not participating in the ECR.
Other Information
Statutory and/or regulatory authority of each RGGI state: Each state implements the program under its particular statutory authority.
Environmental and energy agencies for each RGGI state: Agencies implementing the respective CO2 budget trading programs.
RGGI Inc.: Non-profit cooperative supporting RGGI’s development and implementation. This includes engaging contractors for various tasks such as allowance and emissions tracking, market monitoring, and management of the auctions.
Potomac Economics: Monitors the conduct of market participants in the auctions and in the secondary market to identify indications of anti-competitive conduct.
Enel X: Manages the auctions.
The RGGI participating states periodically review the ETS to consider program successes, impacts, and design elements. The first program review process (known as the 2012 Program Review) was completed in early 2013. A second review process was completed in 2017, resulting in the 2017 Model Rule. Program reviews were accompanied by stakeholder meetings and the submission of comments from interested parties.
The RGGI states initiated the third review in summer 2021 to analyze program successes, impacts, potential additional reductions to the cap post-2030, and other design elements. The review is ongoing.
USA - Washington Cap-and-invest Program
General Information
Washington’s cap-and-invest program began operating in January 2023. It covers around 70% of the state’s emissions, and its cap trajectory is consistent with the long-term target to reduce statewide emissions to 95% below 1990 levels by 2050.
The program covers emissions from 97 entities in the mining, energy, industrial, buildings, and transport sectors. Many of the Cap-and-Invest Program’s design elements are similar to those of California’s Cap-and-Trade Program. Covered entities must surrender allowances for all their covered emissions. Allowances are distributed through auctioning and free allocation, with the latter based primarily on benchmarking. The program has a cost containment reserve and auction reserve price to support market stability and moderate covered entities’ compliance costs.
The Cap-and-Invest Program was established by the Climate Commitment Act (CCA), signed into law by then-Governor Jay Inslee in May 2021. Washington is the second state in the United States to pass a law requiring such an economy-wide program, after California. Launched as a standalone system, the CCA directed the Department of Ecology to pursue linking. Senate Bill 6058, which is designed to facilitate linkage, went into effect in January 2025.
2024 was a pivotal year for Washington's Cap-and-Invest Program. In March, Initiative 2117, aimed at repealing the CCA, was certified for the ballot. Later in March, the governments of Washington, California, and Québec issued a joint statement on the potential to form a shared carbon market through linkage. At the end of the month, Governor Inslee signed Senate Bill 6058 into law. The bill modified certain provisions of the CCA to facilitate linkage with California and Québec. Some provisions went into effect on 1 January 2025, and some will be implemented through rulemaking.* Discussions about potential linkage with California and Québec are ongoing.
The year's most significant event occurred in November’s polling day, when Initiative 2117 was defeated by a margin of almost 24 percentage points, securing the program’s future and paving the way for a potential future linkage.
*Washington Department of Ecology CCA Market Notice on Senate Bill 6058 implementation available here.
Emissions & Targets
96.1 MtCO2e (2021)
By 2030: 45% reduction from 1990 GHG levels (“Greenhouse Gas Emission Limits – Amendment 2020”)
By 2040: 70% reduction from 1990 GHG levels (Greenhouse Gas Emission Limits – Amendment 2020)
By 2050: 95% reduction of total GHG emissions below 1990 levels and achievement of net-zero emissions (Greenhouse Gas Emission Limits – Amendment 2020)
Size & Phases
FIRST COMPLIANCE PERIOD: Four years (2023 to 2026)
SECOND COMPLIANCE PERIOD: Four years (2027 to 2030)
THIRD COMPLIANCE PERIOD: Four years (2031 to 2034)
Under Senate Bill 6058, the Department of Ecology may be required to revise the definition of “compliance period” through rulemaking to align with a linked jurisdiction. However, the length of the first compliance period will not change.
A cap limits the total emissions allowed in the system.
FIRST COMPLIANCE PERIOD: The cap for 2023 was set at 63 MtCO2e, which is equal to 93% of average emissions levels of covered entities between 2015 and 2019. The cap declines annually by 7%, to reach 49 MtCO2e in 2026.
SECOND COMPLIANCE PERIOD: The cap for 2027 will be set at 93% of the sum of the 2026 cap and emissions from new entities entering the program for the second compliance period. The cap declines by 7% annually through 2030.
THIRD COMPLIANCE PERIOD AND BEYOND: The cap for 2031 will be set at 98.2% of the sum of the 2030 cap and emissions from new entities entering the program for the third compliance period. In the period from 2032 to 2042, the cap declines annually by 1.8%.
In the period from 2043 to 2049, the cap declines annually by 2.6%, reaching a 95% reduction from 1990 emissions levels by 2050.
FIRST COMPLIANCE PERIOD: All facilities with emissions over 25,000 tCO2e, including industrial facilities, electricity generators, importers of electricity, fuel distributors, and natural gas suppliers. Excludes emissions from waste-to-energy and solid waste management. From 2025 onward, Senate Bill 6058 reduces the threshold for inclusion for some unspecified electricity imports to zero.
SECOND COMPLIANCE PERIOD: Waste-to-energy facilities with emissions over 25,000 tCO2e in at least one year between 2023 and 2025 will be added.
THIRD COMPLIANCE PERIOD: Railroad companies with emissions over 25,000 tCO2e in at least one year between 2027 and 2029 will be included.
VOLUNTARY OPT-IN PARTICIPATION: Any facility that is already covered by the mandatory MRV system but with emissions below the 25,000 tCO2e Cap-and-Invest Program inclusion threshold may voluntarily participate as an opt-in entity. Other facilities, including federal power marketing administrations (FPMA), can also participate as opt-in entities. Opt-in entities become covered by the mandatory MRV system and must follow the same MRV requirements as other covered entities.
Upstream (building, power [imported electricity] transport); point source (mining, industry, power).
97 covered entities and 96 general market participants, offset providers, and utilities that do not have a compliance obligation but receive allowance allocation (2023)
Allowance Allocation & Revenue
Allowances are distributed via free allocation, free allocation with consignment, and auction.
FREE ALLOCATION: Emissions-intensive, trade-exposed facilities receive free allowances to mitigate the risk of carbon leakage. Allocation is done using facility-specific benchmarks, based on their average carbon intensity over the period between 2015 and 2019. Facilities could request free allocation based on their average emissions (i.e., grandparenting) only in a few instances where they were unable to calculate the emissions intensity of their production over this period. The reduction schedule that is applied to the allocation of no-cost allowances to eligible facilities will be based on four-year periods that are specified in the statute, instead of compliance periods.
FIRST COMPLIANCE PERIOD: Set at 100% of the benchmark multiplied by actual production, or historical emissions level.
SECOND COMPLIANCE PERIOD: Set at 97% of the benchmark multiplied by actual production, or historical emissions level.
THIRD COMPLIANCE PERIOD: Set at 94% of the benchmark multiplied by actual production, or historical emissions level.
FREE ALLOCATION WITH CONSIGNMENT: Electricity utilities receive free allowances based on forecasts of the electricity supply and administrative costs associated with complying with the Cap-and-Invest Program. During the first compliance period, they can choose to consign up to 100% of their allowances to auction. Natural gas facilities received an initial free allocation equal to 93% of their average emissions in the period from 2015 to 2019. The amount reduces annually in line with the cap decline factor. In 2023, 65% of free allowances must have been consigned for auction. This amount increases by 5% each year, reaching full consignment in 2030. Freely allocated allowances that are not consigned for auction may only be used for surrender and cannot be traded. Whether consigned or not, the allowance value allocated to electricity utilities and natural gas suppliers is required to be used for ratepayer benefit.
AUCTIONING: Auctions occur four times a year. Unsold allowances are held for future auctions and only sold if the settlement price is above the auction floor price for two consecutive auctions. Any that remain unsold within 24 months are transferred to an emissions containment reserve (see ‘Market Stability Provisions’ section).
USD 2.6 billion of state revenue since the beginning of the program (USD 3.3 billion including consigned auctions)
USD 810.8 million in 2024 (USD 1.1 billion including consigned auctions)
USE OF REVENUE FROM FREE ALLOWANCES CONSIGNED FOR AUCTION: Revenues raised from the auctioning of free allowances on behalf of electricity utilities and natural gas facilities must be used to benefit rate payers or customers, prioritizing those from low-income groups. In most cases how the revenues are used is determined by the state’s Utilities and Transportation Commission.
USE OF REVENUES FROM ALLOWANCES AUCTIONED BY THE DEPARTMENT OF ECOLOGY: Proceeds from auctions are split into seven accounts:
- Carbon Emissions Reduction Account (CERA);
- Climate Active Transportation
Account (CATA);
- Climate Transit Programs Account (CTPA);
- Climate Investment Account (CIA);
- Climate Commitment Account (CCA);
- Natural Climate Solutions Account (NCSA); and
- Air Quality and Health Disparities Improvement Account (AQHDIA).
Each account is intended for different environmentally beneficial activities. Not all projects funded from these accounts are intended to reduce GHG emissions. Funds in each of these seven accounts are to be appropriated for specific types of climate, environmental justice, and ecological projects. The CCA requires that a minimum of 35%, with a goal of 40%, of money from CCA accounts be used for projects that provide a direct and meaningful benefit to vulnerable populations within overburdened communities. At least 10% of CCA account funds are required to be used for projects formally supported by the resolution of a Tribe.
During fiscal year 2024 (1 July 2023 through 30 June 2024), 37 agencies received appropriations totaling USD 3.2 billion and approximately USD 472 million was spent.* During the 2024 legislative session, the Legislature specified that approximately USD 645 million of the USD 3.2 billion in appropriations could not be spent until January of 2025, pending the results of Initiative 2117. As the initiative failed to pass, agencies will have until June 30, 2025, to spend these funds. Of the amount already spent, approximately USD 200 million was through CTPA and about USD 100 million through each of CCA and NCSA.
* The annual report titled “Distribution of Funds from CCA Accounts” for Fiscal Year 2024 is available here.
Flexibility & Linking
Unlimited banking is allowed between periods; however, covered entities are subject to general holding limits, which depend on the cap level. Allowances held in a compliance account to be used for compliance or that are to be consigned for auction do not count towards the holding limit.
Borrowing is not allowed.
The use of offset credits is allowed.
QUALITATIVE LIMITS: Washington has adopted – with modifications – the following offset credit protocols developed under the California Cap-and-Trade Program:
- Livestock projects;
- Ozone depleting substance projects;
- US forest projects; and
- Urban forestry projects.
QUANTITATIVE LIMITS:
First compliance period: Up to 5% of an entity’s compliance obligation from projects not located on federally recognized tribal land. The ongoing rulemaking process will increase this limit to 8%. An additional 3% can be met from projects located on federally recognized tribal land.
Second compliance period: Up to 4% of an entity’s compliance obligation from projects not located on federally recognized tribal land. The ongoing rulemaking process will increase this limit to 6%. An additional 2% can be met from projects located on federally recognized tribal land.
Third compliance period and beyond: Up to 4% of an entity’s compliance obligation, which can include projects located on federally recognized tribal land. An additional 2% can be met from projects located on federally recognized tribal land.
In the event of a link to another trading system, at least 50% of offset credits must provide direct environmental benefits to the state (DEBS) in the first compliance period, rising to 75% from the second compliance period. Without a link, all offset credits must provide DEBS.
Entities surrendered 26,280 offset credits in 2023, corresponding to 0.13% of total instruments surrendered for compliance.
The Washington Cap-and-Invest Program is not currently linked with any other system. However, in November 2023, the Department of Ecology announced that it would pursue linkage with the cap-and-trade programs of California and Québec. In March and September 2024, joint statements from the governments of Washington, California and Québec affirmed their commitment to explore potential linkage.
Compliance
Four years
Except for the year following the last year of a compliance period, compliance instruments equal to at least 30% of the previous year’s verified emissions must be surrendered annually, by the start of November (or the first business day thereafter). Compliance instruments equal to all remaining emissions must be surrendered by the start of November (or the first business day thereafter) of the year following the last year of a compliance period.
REPORTING FREQUENCY: Annual
VERIFICATION: All reports are verified by independent third-party verifiers and by the Department of Ecology.
FRAMEWORK: The MRV framework was established by the regulation “Reporting of Emissions of Greenhouse Gases”.
Should an entity have insufficient allowances to cover its annual and final compliance obligations, within six months of the deadline it must submit four allowances for each missing allowance it did not surrender. If the entity fails to comply, a fine of up to USD 10,000 per day per missing allowance will be incurred.
Market Regulation
MARKET PARTICIPATION: Compliance entities, including opt-in entities; non-compliance entities, including offset project participants; individuals with primary residence in the United States.
MARKET TYPES:
Primary: Auctions are held four times per year, with a calendar giving dates and volumes published in January of each year. Participants must have an account in the Compliance Instrument Tracking System Service (CITSS). Auctions are delivered through the Western Climate Initiative, Inc.
Secondary: Futures and options contracts for allowances are traded on the Intercontinental Exchange and Nodal Exchange. Allowances can be traded over the counter directly between market participants.
AUCTION PRICE FLOOR
Instrument type: Price-based instrument
Functioning: The auction price floor is set at USD 25.85 for 2025. It increases by 5% plus inflation annually, as measured by the nationwide Consumer Price Index for All Urban Consumers (CPI-U) identified by the US Bureau of Labor Statistics.
ALLOWANCE PRICE CONTAINMENT RESERVE (APCR)
Instrument type: Price-based instrument
Functioning: The APCR is a separate account managed by the Department of Ecology, from which allowances can be auctioned at pre-defined prices in the event of unexpectedly high allowance costs. The APCR was frontloaded, with 5% of the caps in the first and second compliance periods (covering 2023 to 2030) set aside at the outset of the program. The APCR has two price tiers, which in 2025 are set at USD 60.43 and USD 77.63 for Tiers 1 and 2 respectively.* Prices increase annually by 5% plus inflation, as measured by the CPI-U.
Auctions from the APCR are held if the settlement price in the last auction reaches the Tier 1 price level. These sales may only be held once a year before the compliance deadline, and only covered and opt-in entities can participate. Bids must be at one of the two price levels. Purchased allowances are deposited directly into entities’ compliance accounts and cannot be traded on secondary markets. Any unsold allowances are carried over to future APCR auctions. Three APCR Auctions (in August 2023, November 2023 and October 2024) have taken place since the Program’s launch, with a total of just over 7 million allowances sold.
PRICE CEILING UNITS
Instrument type: Price-based instrument
Functioning: If there are no units remaining in the APCR, price ceiling units are made available to covered entities with insufficient allowances to meet their compliance obligations. Price ceiling unit sales only occur at the end of a compliance period and following the request of a covered entity, which must be at least ten days before the compliance deadline. The ceiling price is USD 94.85 for 2025, increasing annually by 5% plus inflation, as measured by the CPI-U.
EMISSIONS CONTAINMENT RESERVE (ECR)
Instrument type: Price-based instrument
Functioning: Allowances can be withheld from an auction and placed in the ECR if auction settlement prices fall below the ECR trigger price. The trigger price is currently suspended, and this provision is therefore not operational.
* Until a linkage agreement is signed, APCR auctions only include allowances at the Tier 1 price.
Other Information
Department of Ecology: Responsible for the program rules and implementation of the Cap-and-Invest Program.
Western Climate Initiative Inc.: Non-profit organization responsible for administering auctions, the CITSS registry, and conducting market surveillance.
By December 2027, and every four years thereafter, the Department of Ecology is required to submit a comprehensive review of the program to the legislature.
Indonesian Economic Value of Carbon (Nilai Ekonomi Karbon) Trading Scheme
General Information
Indonesia’s Economic Value of Carbon, or Nilai Ekonomi Karbon (NEK), Trading Scheme is a mandatory, intensity-based ETS for the power sector that was launched in early 2023. In its first phase spanning from 2023 to 2024, it exclusively targeted coal-fired power plants connected to the Perusahaan Listrik Negara (PLN) grid with a capacity of 25 MW or greater. In 2023, the ETS covered 99 coal-fired power plants, estimated to represent around 37% of the national power generation capacity or around 67.6% of the national coal-fired power plant capacity. In 2024, 47 additional coal-fired power plants were covered under the ETS, bringing the total number of covered installations in the scheme to 146.
The Indonesian government has established intensity targets, known as “Technical Emissions Ceiling Approvals”, or Persetujuan Teknis Batas Atas Emisi (PTBAE). These targets determine the number of allowances that installations receive for each MWh of electricity generated. Covered entities must surrender allowances for all their covered emissions, with allocation based on PTBAE, emission intensity, and emission average. Additionally, entities have the option to purchase allowances via auctions.
The majority of the plants covered by the ETS are operated by the state-owned electricity company PLN. The government anticipates a reduction of approximately 25.73 MtCO2e through the ETS in its first year.
Eventually, the Indonesia ETS is expected to function as a hybrid “cap-tax-and-trade” system, operating concurrently with a carbon tax. Facilities failing to meet their obligations under the ETS will be subject to this tax, the rate of which will be aligned with the domestic carbon market’s price.
The Indonesian Carbon Exchange (IDXCarbon) was officially launched in September 2023, under the supervision of the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan, OJK).
In 2024, the scope of the ETS was expanded to cover installations with a capacity of 25 MW or more, adding another 47 coal-fired power plants to the scheme. According to current plans, captive coal-fired power plants (CFPPs) that are not connected to the electricity grid and gas power plants (gas fired power plants, gas engine power plants and combined cycled power plants) will join the ETS in its second phase, from 2025.
Emissions & Targets
1,070.5 MtCO2e (2022)
By 2030: 31.9% below BAU including LULUCF (unconditional, enhanced NDC); up to 43.2% below BAU including LULUCF (conditional on international support, enhanced NDC)
By 2060: Climate neutrality (“Long-Term Strategy for Low Carbon and Climate Resilience”, July 2021)
Size & Phases
PHASE 1: Two years (2023 and 2024)
PHASE 2: Three years (2025 to 2027)
PHASE 3: Three years (2028 to 2030)
Note: These phases apply exclusively to the power sector.
The total emissions limit under the Indonesian ETS is the sum of the bottom-up output-based emissions limits for all individual covered entities.
The Ministry of Energy and Mineral Resources (MEMR) establishes the PTBAE, or the emissions limit, for the power sector. This is based on: (i) actual emissions, which must be below the emissions reduction target set for the sector, and (ii) the carbon trading roadmap for the power sector.
PHASE 1:
The ETS was applicable only to coal-fired power plants connected to PLN’s grid. The total emissions limit was approximately 256.8 MtCO2e.
The emissions limit for the power subsector for Phase 1 was as follows:
- non-mine mouth coal-fired power plants with a capacity of ≥25 MW to <100 MW: 1.297 tCO2e/MWh
- mine mouth coal-fired power plants with a capacity of ≥100 MW: 1.089 tCO2e/MWh
- non-mine mouth coal-fired power plants with a capacity of 100 MW to ≤400 MW: 1.011 tCO2e/MWh
- non-mine mouth coal-fired power plants with a capacity of >400 MW: 0.911 tCO2e/MWh
PHASE 2 and PHASE 3:
The emissions limits for the second and third phases have not yet been determined, but they are expected to be more stringent than in the first.
PHASE 1: Coverage was limited to coal-fired power generators connected to PLN’s grid only. Details on thresholds are provided below.
PHASE 2: The government plans to expand the scheme to include coal-fired power plants with capacity above 25 MW and not connected to PLN’s grid (captive CFPPs), gas-fired power plants, gas engine power plants and combined cycled power plants connected to PLN’s grid.
PHASE 3: The expansion will encompass all fossil fuel power plants, including diesel power plants with a capacity of 2 MW or greater and coal-fired power plants with capacity below 25 MW regardless of their connection to PLN’s grid.
INCLUSION THRESHOLDS: In 2024, coal-fired power generation facilities with installed capacity exceeding 25 MW are included. Smaller coal and fossil fuel plants will be incorporated at a later point (see above).
The Ministry of Environment (MoE) has indicated that the government plans to implement emission caps for four additional sectors in the future: forestry, industrial processes and product use, agriculture, and waste management.
Point source
In 2023: 42 entities covering 99 installations
In 2024: 63 entities covering 146 installations
Note: The number of entities and installations is expected to continue increasing as new installations commence operations and additional categories are included, in line with the roadmap's expansions.
Allowance Allocation & Revenue
In Indonesia, allowances are referred to as Persetujuan Teknis Batas Atas Emisi Pelaku Usaha (PTBAE-PU).
PHASE 1:
Auctioning: In the Indonesian ETS, auctioning is conducted through a system managed by IDXCarbon, where bid and offer instructions are matched based on a time and price priority scheme (refer to the ‘Market Design’ section).
- Auction share: 0% (2024)
- Auction volume: None
To date, no auction has taken place. Details regarding auction shares and related requirements or provisions are yet to be determined.
Benchmarking: MEMR sets intensity targets based on cap/PTBAE, installations’ average emissions of the previous year, and installations’ average emissions intensity of the previous year. These targets dictate the number of PTBAE-PU allowances allocated for every MWh of electricity generated. If the necessary data is unavailable, allocation is based on comparison with similar plants of equivalent installed capacity. In the first year, allowances will be given 100% for free. For the second year or the following year, installations will receive either 75% or up to 85% of their allowances for free. The deduction percentage depends on the installation’s compliance with the ETS.
Covered entities that receive allowances must participate in trading. If they do not, they receive a written warning and free allocation for the next compliance period is reduced to 75%.
Not defined
Flexibility & Linking
Banking is allowed within phases, though PTBAE-PUs are valid for a maximum of two years from the end of the previous compliance period. Banking is not allowed across phases.
Borrowing is not allowed.
The use of domestic offset credits – known as carbon reduction units, or Sertifikat Pengurangan Emisi Gas Rumah Kaca (SPE-GRK) – is allowed. Credits equivalent to SPE-GRKs may also be used.
QUALITATIVE LIMITS: Offset credits must stem from mitigation activities from:
- New and renewable energy power plants;
- Transportation, construction, and industry including energy efficiency activities; or
- Other activities in the energy sector.
They must also be issued on the national registry.
QUANTATIVE LIMITS: None
In 2023, 6,260 tCO2 in offset credits were retired, all from the Geothermal Lahendong project.
The Economic Value of Carbon NEK Trading Scheme is not linked with any other system.
Compliance
The compliance period for the Indonesian ETS is one year, with trading occurring from 1 January to 20 April of the following year. Surplus allowances at the end of the trading period may be traded in the following period, provided it is within the same phase.
MONITORING: An MRV system is currently in operation in the industrial sector and the power generation sub-sector. Pilot MRV programs are also being conducted in the cement and fertilizer sectors.
REPORTING: Reports are submitted to the MEMR through the Directorate General of Electricity via an online platform, the APPLE-Gatrik. These reports must be submitted by the end of January for the preceding year. Installations must report emissions of CO2, CH4, and N2O, expressed in units of CO2e.
VERIFICATION: Emissions must be verified by a third-party verifier that is accredited by the Komite Akreditasi Nasional (KAN), Indonesia’s national accreditation body. This verification should be completed by the end of March, following the January reporting deadline. Verifiers are required to adhere to the guidelines for GHG emission verification in the power subsector.
The plan was to concurrently implement carbon trading and a carbon tax, with the latter serving as a penalty mechanism. However, as discussions on carbon tax regulations continue and its implementation is postponed, an alternative enforcement approach was introduced:
- Should verified emissions exceed the allocated PTBAE-PU by the end of the period, allocations will be given according to the results of carbon trading transactions in the previous carbon trading period up to a maximum of 85% and the PTBAE-PU will be reduced by up to 15%.
- Entities which fail to report their GHG emissions or participate in carbon trading by the end of the period will see a 25% reduction in their PTBAE-PU.
Market Regulation
MARKET PARTICIPATION:
Compliance entities, specifically those holding an “Electricity Supply Business License for Public Purpose” or “Electricity Supply Business License for Own-Use,” are eligible to engage in carbon trading.
MARKET TYPES
Primary:
In the primary market, allowances and offset credits are traded through a mechanism that may be activated upon request by the relevant ministry. This platform facilitates offset selling, with a potential reserve price set as low as IDR 1 (less than USD 0.01), and bids commencing from this figure or higher. As of January 2025, there have been no auctions conducted under this system, and specific details about auction shares, along with associated requirements and provisions, remain to be defined.
Secondary:
Operated by IDXCarbon, launched at the Indonesia Stock Exchange (IDX) in September 2023 and licensed by the Financial Services Authority (OJK), the secondary market encompasses:
- Regular Market or ‘Continuous Auction’: Matching of bids and offers based on time and price priority, with minimum prices set at IDR 200 (USD 0.01) and governed by fraction price rules and an ‘auto rejection’ rule.
- Negotiated Market: Facilitates the settlement of pre-agreed trades through the exchange, requiring details of counterpart, carbon units, price, and volume.
- Marketplace: Enables project developers to list their projects and set prices.
IDXCarbon is integrated with the national registry, Sistem Registri Nasional Pengendalian Perubahan Iklim (SRN PPI), managed by MoE, ensuring the seamless transfer of carbon credits and preventing double counting.
LEGAL STATUS OF ALLOWANCES: PTBAE-PUs and SPE-GRKs are classified as securities, allowing their transfer and trade in the capital market.
EVALUATION BY MEMR
Instrument type: Quantity-based instrument
Functioning: The MEMR evaluates on a regular basis the implementation of the ETS. If the evaluation reveals a shortage of allowances, the Minister and Director General may conduct additional auctions of PTBAE-PUs.
Other Information
Coordinating Ministry for Economic Affairs (CMEA): Chair and Vice Chair of the National Steering Committee for Carbon Pricing Implementation; coordinates ministries/agencies in developing the national carbon pricing framework.
Ministry of Environment (MoE): National focal point for UNFCCC; leads NDC development and implementation, including national mitigation and adaptation and implementation of carbon pricing (including providing authorization for national and international emission trading, and overseeing offsetting; oversees MRV; operates the national registry, SRN PPI).
Ministry of Energy and Mineral Resources (MEMR): Coordinates ETS implementation in the power subsector, including oversight of an integrated MRV system with the SRN; responsible for preparing and implementing the 2021 voluntary pilot carbon market.
Ministry of Industry: Coordinates implementation of CPIs on the Industrial Processes and Product Use sector, including an emissions reporting system to be integrated with the SRN.
Ministry of Finance: Leads the development and implementation of the carbon tax.
Indonesian Environment Fund: Handles climate funding; manages ETS revenues, including any international carbon credit trading.
Financial Services Authority (OJK): Oversees IDXCarbon, which is hosted on the Indonesia Stock Exchange.
The Minister of Energy and Mineral Resources, through the Directorate General of Electricity, evaluates the Indonesian ETS every six months. Results of this evaluation may lead to adjustments in the policy.