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USA - Regional Greenhouse Gas Initiative (RGGI)

Compare ETS
ETS Status
in force
Jurisdictions
Connecticut
Delaware
Maine
Maryland
Massachusetts
New Hampshire
New Jersey
Rhode Island
Vermont
Virginia
New York
Start of operation (year)
2010
Sectoral coverage
Power
Allocation
Auctioning
Offsets and credits
Domestic (within RGGI states only)
Cap
97.0 million short tons CO2 or 88.0 MtCO2 (2022)
GHGs covered
CO2
Average auction price
USD 10.59
Total revenue since beginning
4.7 billion
Total revenue (2021)
USD 926 million
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General Information

The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory GHG ETS in the United States and covers emissions from the power sector. The system started operating in 2009 with ten states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont). Its 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. After withdrawing from RGGI at the end of the first control period in December 2011, New Jersey renewed its participation in 2020, while Virginia joined in 2021.

RGGI has gone through two review processes that updated the Model Rule and enshrined tighter caps and adjustments to system design. Between 2021 and 2030, the RGGI cap will reduce by 30% compared to 2020. RGGI’s third review process is currently ongoing.

In April 2022, the final regulation to establish an ETS in Pennsylvania covering CO2 emissions from the power sector and to join RGGI was published. Under the regulation, covered entities in Pennsylvania had to begin accounting for their emissions as of 1 July 2022. Pennsylvania’s share of emissions in the 2022 RGGI cap amounts to 45%. Shortly after its publication, the regulation was disputed by a collection of local coal stakeholders, including power plant owners, coal mine owners, and workers unions, who filed lawsuits in front of the Commonwealth Court. The final ruling is still pending. Until further action by the courts is taken, the Pennsylvania Department of Environmental Protection will not take steps to implement or enforce the RGGI regulation.

An emissions containment reserve (ECR) started operating in 2021. The ECR is an automatic adjustment mechanism that will adjust the cap downward in the face of lower-than-expected costs.

The RGGI states initiated the Third Program Review in summer 2021 to analyze program successes, impacts, potential additional reductions to the cap post-2030, and other design elements. The review is expected to be concluded in 2023.

Power

Emissions & Targets

612.2 million tons CO2*

* This value does not include Pennsylvania.

By 2030: 30% cut in power sector emissions compared to the 2020 CO2 emissions cap (2017 Model Rule)

Note: The participating states have their own emission targets; economy-wide targets are not defined at the level of RGGI.

USD 7.06 (average price in 2020; updated prices available here)

Size & Phases

64.50MtCO2e
CO2

A cap trajectory until 2030 has been set.

FIRST PHASE: 2009-2011
SECOND PHASE: 2012-2014
THIRD PHASE: 2015-2017
FOURTH PHASE: 2018-2020
FIFTH PHASE: 2021-2023

FIRST PHASE (2009-2011): 564 million short tons CO2 or 512 MtCO2 (188 million short tons CO2 or 171 MtCO2 per year)

 

SECOND PHASE (2012-2014): 413 million short tons CO2 or 374 MtCO2

2012-2013: 165 million short tons CO2 or 150 MtCO2 per year

2014: 83 million short tons CO2 or 75 MtCO2

 

THIRD PHASE (2015-2017): 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

 

FOURTH PHASE (2018-2020): 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

 

FIFTH PHASE (2021-2023): 291 million short tons CO2 or 264 MtCO2

2021: 101 million short tons CO2 or 91 MtCO2

2022: 138 million short tons CO2 or 125 MtCO2

2023: 169 million short tons CO2 or 153 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, Virginia from 2021 and Pennsylvania from 2022.

Fossil fuel electric generating units

INCLUSION THRESHOLD: 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 regulated generating unit or near two or more units of the same source.

Downstream 

228 (November 2021)

Allowance Allocation & Revenue

CO2 allowances issued by each RGGI state are distributed through quarterly auctions. A limited amount may be held in set-aside accounts and distributed according to state-specific programs. Auctions are open to all parties with financial security, with a maximum bid of 25% of offered allowances per quarterly auction.

Since the beginning of the program: USD 4.7 billion
In 2021: USD 926 million

Revenues from the quarterly auctions are returned to the RGGI states and have been primarily invested in the following consumer benefit programs: energy efficiency, renewable energy, direct energy bill assistance, and other GHG reduction programs. A report released in June 2021 found that the direct lifetime benefits of RGGI investments made in 2019 include USD 1.8 billion in lifetime energy bill savings and 2.5 million short tons of CO2 emissions avoided.

Flexibility & Linking

Banking of allowances is allowed without restrictions, but regulations include adjustments to the cap to address the aggregate bank. This means that the number of allowances available for auctions in future years is reduced by the number of allowances not used for compliance in previous control periods (see also ‘Cap’ above).

Borrowing is not allowed.

QUANTITATIVE LIMIT: 3.3% of an entity’s liability may be covered with offsets. This share will remain the same between 2021 and 2030.

QUALITATIVE LIMIT: Currently, the program allows offset allowances from three offset types located in RGGI states:

(1) landfill methane capture and destruction;

(2) sequestration of carbon due to reforestation, improved forest management, or avoided conversion; and

(3) 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.

Compliance

Three years

Compliance is evaluated at the end of each three-year phase, or “control period”. From the third phase, regulated 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.

REPORTING FREQUENCY: Quarterly

VERIFICATION: Emission data reports and their underlying data are required to undergo periodic quality assurance and quality control procedures in accordance with US EPA regulations.

FRAMEWORK: Emissions data for emitters are recorded in the United States Environmental Protection Agency’s (US EPA) Clean Air Markets Division database in accordance with state “CO2 Budget Trading Program” regulations and US EPA 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 (RGGI COATS), which is publicly available.

In case of excess emissions (i.e., if entities do not surrender all required allowances), allowances for three times the number 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 CO2 Allowance Tracking System (RGGI COATS) records and tracks data for each state’s CO2 Budget Trading Program, including the transfer of allowances that are offered for sale by the states and purchased by the winning qualified bidders in the quarterly auctions. Potomac Economics, an independent market monitor, monitors the performance and efficiency of the RGGI CO2 allowance auctions and the secondary CO2 allowance market.

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 reports of RGGI data and CO2 allowance market activity.

LEGAL STATUS OF ALLOWANCES: Allowance under the CO2 Budget Trading Program is a limited authorization by the Department or a participating state to emit one ton of CO2 in accordance with the CO2 Budget Trading Program. No provision of the CO2 Budget Trading Program, the CO2 budget permit application, the CO2 budget permit, or any provision of law shall be construed to limit the authority of the Department or a participating state to terminate or limit such an authorization.

AUCTION PRICE FLOOR: USD 2.44 per short ton in 2022, increasing by 2.5% per year (to reflect inflation).

RESERVES: Since 2014, RGGI has operated with a cost containment reserve (CCR), consisting of a quantity of allowances in addition to the cap which are held in reserve and only released to the market when certain trigger prices are reached. Beginning in 2021, allowances provided within the CCR will be equal to 10% of the regional cap. The trigger price is USD 13.91 in 2022, increasing by 7% per year thereafter. It had previously increased by 2.5% per year starting from USD 10 between 2017 and 2020.

The CCR had been triggered in 2014 and 2015. All 15 million allowances were sold from the CCR for the period from 2014 to 2015. 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.

In 2021, RGGI started implementing an emissions containment reserve (ECR). Under the ECR, allowances are withheld 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 2022, the trigger price is USD 6.42, increasing by 7% per year thereafter. Maine and New Hampshire are not participating in the ECR.

Other Information

Statutory and/or regulatory authority of each RGGI state
Environmental and energy agencies for each RGGI state
RGGI Inc. (non-profit cooperative supporting RGGI’s development and implementation)

The RGGI participating states periodically review the ETS program 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 to facilitate stakeholder engagement 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 expected to be concluded in 2023.

2017 RGGI Model Rule 
2017 RGGI Model Rule Updates (Summary)
RGGI States’ Statutes & Regulations
RGGI Program Design

 

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