On 15 March 2021, the Regional Greenhouse Gas Initiative (RGGI), a market-based program covering emissions of the electricity sector in 11 Northeastern and Mid-Atlantic US states, announced its Third Adjustment for Banked Allowances, which will apply over a five-year period (2021-2025) and result in an annual cap reduction of 16-18%.

The downward adjustment of the RGGI cap accounts for the surplus of banked allowances accumulated by covered entities in the fourth control period (2018-2020) and aims at reducing the amount of allowances available for auctions in future years by the amount of allowances not used for compliance in previous years. The third cap adjustment comes as one of the results of the 2017 program review, with the adjustment based on the size of the bank as of 15 March 2021.

The adjustment will reduce the cap by 19.09 million short tons CO2 (17.31 MtCO2) annually, amounting to a total reduction of 95.45 million short tons CO2 (86,59 MtCO2) over the five-year period and resulting in a 2025 cap of 86.06 million short tons CO2 (78.07 MtCO2). The adjusted 2025 cap will be 18% lower than the unadjusted 2025 cap.

According to the 2017 Model Rule, the adjustment for the banked allowances is determined by subtracting the total quantity of 2018, 2019, and 2020 actual emissions from all participating states from the total quantity of pre-2021 allowances held by covered entities in their general and compliance accounts. This number is then divided by five to determine the annual reduction and further multiplied by the relevant RGGI state’s 2021 cap divided by the 2021 regional cap to determine the reduction per RGGI state.

The annual breakdown of the third adjustment of banked allowances is detailed in the table below.







Base cap (in MtCO2)






Bank adjustment (in MtCO2)






Adjusted cap (in MtCO2)






In the first and second adjustments for banked allowances, the cap was adjusted by 8.21 million short tons CO2 (7.45 MtCO2) per year over the 2014-2020 period and, additionally, by 13.68 million short tons CO2 (12.41 MtCO2) per year over the 2015-2020 period to account for banked allowances accumulated in the first and second control periods.

RGGI started operating in 2009 and is the first mandatory GHG ETS in the US. The 2020 average allowance price in RGGI was USD 7.06/short tCO2 and is currently around USD 7.80/short tCO2. With Virginia joining RGGI in 2021, the initiative expanded its membership to 11. Currently, Pennsylvania is pursuing an ETS that would include joining RGGI as early as 2022.