On 19 December 2017, the Regional Greenhouse Gas Initiative (RGGI), a compact of nine Northeastern and Mid-Atlantic U.S. states, released the updated 2017 Model Rule that outlines major program elements that will guide the program between 2020 and 2030. A key element is a further reduction of the emissions cap to 30% below 2020 levels.  This is more than 65% below the RGGI cap that was set in 2009.

Other key elements include the creation of an Emissions Containment Reserve (ECR), modifications to the Cost Containment Reserve (CCR) and adjustments to the RGGI cap to account for excess unsold allowances that have been banked up to 2020.

The ECR is an automatic adjustment mechanism that starts operation in 2021, adjusting the cap downward in the face of lower-than-expected costs. Under the ECR, participating states withhold allowances from auction if prices fall below a specific threshold. There is an annual ECR allowance withholding limit of 10% of the budgets of participating states. The ECR trigger price starts at USD 6, rising by 7% annually thereafter. Allowances withheld will not be re-offered for sale, thereby adjusting the cap downward. Maine and New Hampshire do not intend to implement the ECR at this time.

Trigger prices for RGGI’s Cost Containment Reserve, which releases additional allowances into the market when allowance prices surpass a pre-established threshold start at USD 13 in 2021, rising at 7% annually thereafter. 

Together, those two reserves would create a price band between USD 6 and USD 13, both increasing at 7% annually.

The changes are the result of the second scheduled program review of RGGI. It is now up to the participating states to amend their respective state regulations to reflect these changes.