In 2003, governors from Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont began discussions to develop a regional cap-and-trade program addressing carbon dioxide emissions from power plants.
On December 20, 2005, seven of those states announced an agreement to implement the Regional Greenhouse Gas Initiative, as outlined in a Memorandum of Understanding (MOU) signed by the Governors of Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont. The MOU, as amended, provides the outlines of RGGI, including the framework for a Model Rule.
In August 2006, the original seven MOU signatory states published a Model Rule, which provided a regulatory framework for the development of individual state regulatory and/or statutory proposals. The model set of regulations detailed the proposed program, as outlined in the MOU.
In early 2007, Massachusetts and Rhode Island, which had participated in the early development of RGGI, signed the MOU, as did Maryland later that year.
Through statutes or regulations based on the RGGI model rule, each state established individual CO2 Budget Trading Programs. Together, these compose a regional cap and market for allowances. Each state's CO2 Budget Trading Program limits emissions of CO2 from electric power plants, issues CO2 allowances and establishes participation in regional CO2 allowance auctions.
The first compliance period for each state's linked CO2 Budget Trading Program began January 1, 2009.