massachusetts_michael-baccin-lvon28ktsx0-unsplash
© Michael Baccin / Unsplash

USA - Massachusetts Limits on Emissions from Electricity Generators

Compare ETS
ETS Status
in force
Jurisdictions
Massachusetts
Start of operation (year)
2018
Sectoral coverage
Power
Allocation
Auctioning
Cap
7.6 MtCO2 (2024)
GHGs covered
CO2 only
Average auction price (2024)
USD 3.31
Average secondary market price (2024)
USD 3.62
Total revenue since beginning
USD 185.8 million
Total revenue (2024)
USD 19.2 million
Download factsheet

General Information

The Massachusetts Limits on Emissions from Electricity Generators (regulation “310 CMR 7.74”) began operating in 2018. It covers around 9% of the state’s CO2 emissions, all from the power sector. Under this regulation, covered entities must surrender allowances for all of their covered emissions.

Since 2021, 100% of allowances have been allocated in quarterly auctions. Since 2022, future vintage allowances have also been sold in the regular auctions. The revenues raised are used to further reduce GHG emissions, as well as to fund adaptation programs and projects targeting communities adversely impacted by air pollution. A third party monitors the market to identify indications of anti-competitive behavior.

The program complements RGGI: electricity generators in the state must comply (i.e., hold and surrender allowances) with both RGGI and the Massachusetts program. The program was implemented in response to a 2016 ruling from the state’s Supreme Court to ensure that Massachusetts achieves its mandatory mitigation targets.

The September 2024 auction saw prices clear at USD 5.65 per tCO2 for 2024 vintages and USD 5.50 per tCO2 for 2025 vintages, the similar prices reflecting that most firms already had the allowances they needed for 2024 compliance.

The Massachusetts Department of Environmental Protection (MassDEP) is considering raising the minimum reserve price from the current USD 0.50 per allowance. In 2024, it sought stakeholder comments on the proposed increase.

Power
Climate mitigation

Emissions & Targets

67 MtCO2e (2021)*


 

* This value was retrieved from the MassDEP Emissions Inventories.

By 2030: 50% GHG emissions reduction below the 1990 level (“An Act Creating a Next-Generation Roadmap for Massachusetts Climate Policy”)

By 2040: 75% GHG emissions reduction below the 1990 level (An Act Creating a Next-Generation Roadmap for Massachusetts Climate Policy)

By 2050: Net-zero GHG emissions. Positive emissions will be compensated with removals, and positive emissions in 2050 are not to be greater than 85% below the 1990 level. (An Act Creating a Next-Generation Roadmap for Massachusetts Climate Policy)

Weighted average auction price (vintage 2024): USD 3.31 

Weighted average auction price (all vintages in 2024 auctions): USD 3.62

Size & Phases

5.90MtCO2e
CO2 only

A cap limits the total emissions allowed in the system. The cap declines annually by 223,876 tCO2 until it reaches 1.8 MtCO2 by 2050.

ANNUAL CAPS:

2019: 8.7 MtCO2

2020: 8.5 MtCO2

2021: 8.3 MtCO2

2022: 8.1 MtCO2

2023: 7.8 MtCO2

2024: 7.6 MtCO2

2025: 7.4 MtCO2

Large electricity generators subject to RGGI, with an installed capacity of or greater than 25 MW.

Point source (power)

Installations (i.e. Electricity generating facilities)

24 (2023)

Allowance Allocation & Revenue

AUCTIONING: From 2019, allowances were partially auctioned, with 25% sold in 2019 and 50% in 2020. Full auctioning began in 2021. Currently, auctions take place on a quarterly basis. The results are included in market monitoring reports posted on the program’s web page. From 2022, MassDEP offers future vintage allowances at every auction. MassDEP auctioned a total of 6,206,437 vintage 2023 allowances (783,568 in the 2022 auctions and 5,422,869 in the 2023 auctions).

FREE ALLOCATION: Before 2021, non-auctioned allowances were freely allocated through grandparenting based on historical (2013-2015) generation.

USD 185.8 million since the beginning of the program

USD 19.2 million in 2024

Flexibility & Linking

Banking is allowed, but restrictions apply to ensure that emissions in a given year do not exceed the previous year’s cap. To achieve this, the number of allowances auctioned is adjusted downward each year to compensate for banked allowances.

Borrowing is not allowed, but “emergency deferred compliance” is possible. This provision allows an electricity generating facility to defer, for one year, compliance for part or all of the emissions emitted during an emergency. Allowances for those emissions must be surrendered on a two-for-one basis in the following year. An emergency is defined as “a period during when the regional transmission organization has issued an alert that an abnormal condition affecting the reliability of the power system exists or is anticipated in Massachusetts”.

The use of offsets is not allowed.

The Massachusetts ETS is not linked with any other system.

ETS: RGGI

Compliance

Covered entities must surrender one allowance per tCO2e emitted for all their covered emissions. 

One year.

REPORTING FREQUENCY: Covered entities must report the CO2 emissions for the previous calendar year by the start of March.

VERIFICATION: Emissions must match reports to RGGI and the US Environmental Protection Agency. Documents (i.e., emissions reports and compliance certification reports) must be certified by a designated representative identified by the facility, and MassDEP may choose to conduct audits.

If MassDEP finds that an entity is in violation of compliance, this will be presumed to constitute “a significant impact to public health, welfare, safety or the environment”. In addition to penalties, the covered entity must submit three allowances for each metric tonne of non-compliance.

Market Regulation

MARKET PARTICIPATION: Compliance entities only.

MARKET TYPES: 

Primary: The allowance auctions are held every three months using a sealed bid, uniform price auction format. No bidder can purchase more than 45% of the allowances offered for sale in any one auction. Auctions are managed by Enel X.

Secondary: Compliance entities may transfer allowances to other compliance entities at any time except during the month of March. The Massachusetts Carbon Allowance Registry is used to track the ownership of allowances. Potomac Economics monitors the conduct of market participants in the auctions and in the secondary market to identify indications of anti-competitive conduct.

LEGAL STATUS OF ALLOWANCES: Allowances constitute a “limited authorization to emit one metric ton of CO2” to comply with the regulation. They are not property rights.

MINIMUM AUCTION RESERVE PRICE

Instrument type: Price-based instrument

Functioning: Auctions have a reserve price of USD 5 for vintage 2025 allowances. The reserve price is USD 0.50 for future vintage allowance sales.

Other Information

Executive Office of Energy and Environmental Affairs: Cabinet-level office that oversees MassDEP.

Massachusetts Department of Environmental Protection: Regulatory agency implementing the Massachusetts Limits on Emissions from Electricity Generators (regulation “310 CMR 7.74”). 

Potomac Economics: Current market monitor. 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.

APX: Maintains allowance tracking software platform.

The first program review was conducted in 2021, with a review planned every ten years thereafter.

Electricity Generator Emissions Limits (310 CMR 7.74)

Share