The nine Northeastern and Mid-Atlantic states participating in the Regional Greenhouse Gas Initiative, a market-based regulatory program to reduce greenhouse gas emissions, on Aug. 23 proposed a regional cap trajectory that would provide an additional 30 percent emissions cap reduction by the year 2030, relative to 2020 levels.
The states noted that they had reached consensus on a set of draft program elements that will guide the states as they conduct final economic analysis and establish a post-2020 path forward for the program.
Regional Greenhouse Gas Initiative Inc., which was created to provide technical and administrative services to the states participating in RGGI, said that the proposed RGGI program improvements include:
- A regional cap of 75,147,784 tons of carbon dioxide in 2021, which will decline by 2.275 million tons of CO2 per year thereafter, resulting in a total 30% reduction in the regional cap from 2020 to 2030;
- Additional adjustments to the RGGI cap, to account for the full bank of excess allowances at the end of 2020. The amount of this adjustment will be calculated in 2021 according to a formula to be established in a revised model rule, and it will be implemented over the period from 2021-2025; and
- Modifications to the cost containment reserve, or CCR, size and trigger price. The proposed CCR size from 2021 onwards will be 10% of the regional cap. The CCR trigger price will be $13.00 in 2021, and rise at 7% per year, "ensuring that the CCR will only trigger if emission reduction costs are higher than projected," RGGI Inc. said in a news release.
Another proposed RGGI program improvement is implementation of an Emissions Containment Reserve, or ECR, in 2021 under which states would withhold allowances from circulation to secure additional emission reductions if prices fall below established trigger prices.
The states implementing the ECR would withhold up to 10% of the allowances in their base budgets per year. According to the news release, currently Maine and New Hampshire do not intend to implement an ECR.
Allowances withheld in this way would not be reoffered for sale. The ECR trigger price will be $6.00 in 2021, and rise at 7 percent per year, so that the ECR would only trigger if emission reduction costs are lower than projected.
RGGI Inc. said the announcement brings the RGGI states a step closer to the conclusion of a program review process lasting over a year, and incorporating feedback from stakeholders and experts gathered through several public meetings.
As for next steps, the RGGI states will seek stakeholder comment on the draft program elements in a public meeting to be held on Sept. 25. After reviewing stakeholder comments, conducting additional economic analysis, and releasing updated materials including a revised model rule, states will follow state-specific statutory and regulatory processes to propose updates to their CO2 budget trading programs.
RGGI's third "control period" began on Jan. 1, 2015 and extends through Dec. 31, 2017.
The Northeast and Mid-Atlantic states participating in the third RGGI control period are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.
The 2017 RGGI cap is 84.3 million short tons. The RGGI cap declines 2.5 percent each year until 2020.
The RGGI states also include interim adjustments to the RGGI cap to account for banked CO2 allowances. The 2017 RGGI adjusted cap is 62.5 million short tons.