About RGGI
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort by ten Northeast and Mid-Atlantic states to limit greenhouse gas emissions. RGGI is the first mandatory, market-based CO2 emissions reduction program in the United States.
The states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont are signatory states to the RGGI agreement. These ten states will cap CO2 emissions from the power sector, and then require a 10 percent reduction in these emissions by 2018.
RGGI is composed of individual CO2 Budget Trading Programs in each of the ten participating states. These ten programs are implemented through state regulations, based on a RGGI Model Rule, and are linked through CO2 allowance reciprocity. Regulated power plants will be able to use a CO2 allowance issued by any of the ten participating states to demonstrate compliance with the state program governing their facility. Taken together, the ten individual state programs will function as a single regional compliance market for carbon emissions.
How Cap-and-Trade Works
To reduce emissions of greenhouse gases, the RGGI participating states are using a market-based cap-and-trade approach that includes:
- Establishing a multi-state CO2 emissions budget (cap) that will decrease gradually until it is 10 percent lower than at the start
- Requiring electric power generator to hold allowances covering their emissions of CO2
- Providing a market-based emissions auction and trading system where electric power generators can buy, sell and trade CO2 emissions allowances
- Using the proceeds of allowance auctions to support low-carbon-intensity solutions, including energy efficiency and clean renewable energy, such as solar and wind power
- Employing offsets (greenhouse gas emissions reduction or sequestration projects at sources beyond the electricity sector) to help companies meet their compliance obligations
RGGI's phased approach means that reductions in the CO2 cap will initially be modest, providing predictable market signals and regulatory certainty. Electricity generators will be able to plan for and invest in lower-carbon alternatives and avoid dramatic electricity price impacts.
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