On 3 July 2025, the ten participating states of the Regional Greenhouse Gas Initiative (RGGI) released the results of the Third Program Review, a package of reforms to the regional emissions trading system that will take effect from 2027.
The review builds on RGGI’s 2017 Model Rule update and introduces a tightened emissions cap alongside a set of market design changes intended to strengthen the program’s environmental integrity, improve market stability, and ensure continued progress towards the region’s climate goals.
Key changes that will be introduced include:
- Tightened emissions cap: The regional emissions cap will be reduced to about 69.8 million tons of CO₂ in 2027, down from about 75.7 million tons under the previous Model Rule. From 2027 to 2033, the cap will decline by an average of about 8,5 million tons of CO₂ each year, and from 2034 to 2037, it will decline by about 2.4 million tons annually.
- Expanded cost containment reserve (CCR): From 2027, the CCR will be enlarged to about 11.75 million allowances per year (up from 10 million in the previous single-tier structure) and split into two price tiers, each with its own trigger price. In 2027, the trigger prices of the two tiers will be set at USD 19.50 and USD 29.25 respectively, before rising incrementally to USD 38.36 and USD 57.53 by 2037.
- Increased minimum reserve price: The minimum reserve price for auctions will rise to USD 9.00 in 2027 (up from USD 2.62 in 2025), increasing 7% annually thereafter. The increased minimum reserve price will replace the previous emissions containment reserve (ECR) mechanism, which allowed a reserve of allowances to be withheld from an auction if the price fell below a determined trigger price.
- Phase-out of offsets: From 2027 onwards, new offset allowances - tradable credits previously awarded to certain projects that reduce greenhouse gas emissions outside of regulated power plants - will no longer be issued for compliance under RGGI. This marks a departure from the earlier system, where a limited number of these offset allowances could be used by power plants to meet their compliance obligations. Any offset allowances awarded before 2027 may still be used for compliance, subject to existing limits on their use, but no new ones will be granted after this date.
RGGI’s Third Program Review results reflect the participating states’ ongoing commitment to regular, transparent evaluation of program performance. The release of the results of the Third Program Review and the updated Model Rule do not directly make the changes law. Each participating state has committed to undertake its own legal process to amend its regulations to meet the requirements of the updated Model Rule as soon as practical, to be effective by 1 January 2027. The review includes prescription for the Fourth Program Review to begin by 2028 at the latest, allowing for continued adaptation to evolving energy, policy, and market conditions.
More information, including the updated Model Rule, is available on the RGGI program review webpage.
