Audit, Compliance and Risk Blog

Regional Greenhouse Gas Initiative prepares to add a new member

Posted by Jon Elliott on Wed, Aug 05, 2020


One of the longest running sub-national greenhouse gas (GHG) control efforts in the U.S. has been the Regional Greenhouse Gas Initiative (RGGI) program. RGGI provides a cap-and-trade program covering GHG emissions from targeted fossil fuel power plants in participating northeastern states. The program is preparing to add a new participating state in 2021 -- Virginia.

What is RGGI?

In 2003, nine northeastern states (Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont) adopted a RGGI Action Plan calling for the development of a multi-state cap-and-trade program covering GHG emissions. The Action Plan also established guiding principles for the design of state-level programs, including: emphasizing uniformity across the participating states; building on existing successful cap-and-trade programs; ensuring that the program would be expandable and flexible, allowing other states or jurisdictions to join; starting with a narrow focus on power plants; and anticipating subsequent offsets (i.e., credits for reductions outside the power sector).

The governors of seven of these states signed a memorandum of understanding (MOU) in December 2005, joined by Massachusetts, Rhode Island and then Maryland in 2010. The MOU established annual carbon dioxide (CO2) emission caps in each state, providing for the promulgation of a model cap-and-trade rule to be adopted by all states to:

  • regulate CO2 emissions from fossil fuel-fired electricity generating units of 25 megawatts (MWe) or larger

  • employ 2.5% annual reductions in permissible emissions, governed by emission allowances auctioned quarterly (limited offsets are available) with proceeds spent on projects designed to reduce CO2 emissions elsewhere in member states

Member states issued a model RGGI rule in August 2006, as the basis for uniform state regulations. RGGI held its first quarterly auction of emission allowances on behalf of member states in September 2008. Members have revised the MOU and model rule several times, most recently in 2017 (discussed below). New Jersey withdrew from RGGI at the end of 2011, but rejoined on January 1, 2020.

What Has RGGI Accomplished So Far?

The RGGI program is designed to reduce GHG emissions in two ways:

  • directly, when regulated units are required to reduce their own emissions

  • indirectly, when emission allowance auction proceeds are invested in emission-reducing projects in member states

Starting with pre-RGGI emissions, the organization has steadily reduced emissions from the targeted units, from 188 million tons in 2009-2011, to 80.2 million tons in 2019. The RGGI states have also made two interim adjustments to the RGGI cap, to account for the accumulation of banked CO2 allowances. In December 2017, the RGGI members revised the model rule to reflect further emissions reductions of 30% during 2021-2030, extending the cap-and-trade model an additional decade. (I wrote about the extension to 2030 HERE). The revisions also adjust cost containment and reserve allocation provisions.

RGGI also estimates substantial emission reductions from the investment of payments made to buy allowances. For example, the “Investment of RGGI Proceeds in 2017” report (the latest available) tracks the investment of the RGGI proceeds and the benefits of these investments throughout the region, and estimates lifetime benefits including:

  • $1.4 billion in lifetime energy bill savings

  • 9 million MWh of electricity use avoided

  • 6 million MMBtu of fossil fuel use avoided

  • 3 million short tons of CO2 emissions avoided

When New Jersey rejoined, it agreed to comparable terms; Virginia is now accepting the same principles.

What’s happening with Virginia?

Virginia’s then-Governor Terence R. McAuliffe issued an Executive Order in 2016 directing the Secretary of Natural Resources to convene a task force to develop recommendations for emissions reductions and clean energy activities. He followed this in 2017 with an Executive Directive to the Department of Environmental Quality (DEQ) and other agencies to develop a proposed regulation consistent with RGGI provisions by the end of that year. In 2020 present Governor Ralph Northam signed legislation (Clean Energy and Community Flood Preparedness Act) under which Virginia has adopted rules (Regulation Revision A20, effective July 10, 2020). RGGI has reviewed the rules, and confirmed that Virginia qualifies to join the Initiative.

Self-Assessment Checklist

Does the organization have operations in any of the present RGGI states, and/or Virginia?

- Do these include fossil fueled electric generation larger than 25 MW?

- Do these include operations eligible for state programs investing RGGI auction proceeds?

Where Can I Go For More Information?

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About the Author

Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years. 

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at:

Image by marcinjozwiak from Pixabay 

Tags: Environmental, Greenhouse Gas, ghg, RGGI, Fossil Fuel, CO2 Emissions