After weeks of discussion, the nine states participating in the Regional Greenhouse Gas Initiative (RGGI) have reached an agreement to lower the amount of carbon credits available by an additional 30% below 2020 levels by 2030, an annual reduction of 3%. This program update means that the regional 2030 cap will be 65% below the 2009 starting level.
RGGI, started in 2005, is the first mandatory market-based program in the United States to reduce greenhouse gas emissions. RGGI employs cap-and-trade, which sets a carbon emissions budget for the regional power sector of the states involved. Currently, there are nine participating states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. The allocated carbon dioxide allowances, each equivalent to the emission of one short ton of carbon dioxide, are auctioned off quarterly to power generators, who purchase them based on how much carbon dioxide they are projected to emit. If a company ultimately requires fewer allowances than purchased, it may sell them to another company that initially purchased too few allowances to cover its quarterly emissions. Each year, the carbon emissions budget is reduced in an active effort to lower the country’s impact on the environment.
In recent years, emissions have consistently been below the maximum budget cap. While this is good news for the environment, it has also been keeping prices for carbon allowances low, resulting in less incentive to invest in renewable energy. To raise incentives, environmental groups have been calling for a lower cap to reduce the number of available carbon credits.
The agreement also includes other features for which environmental groups have advocated. A plan will be put in place to account for excess carbon allowances that companies have “banked,” meaning the carbon credits they’ve purchased but not used. Additionally, the agreement includes a provision to set a minimum price for carbon allowances so as to maintain incentive to reduce emissions. This Emissions Containment Reserve (ECR) allows states to lower the number of carbon allowances for auction should their price dip below $6 per ton of carbon.
The agreement was also a major test for Governor Andrew Cuomo, who has pledged bring together fellow state leaders to uphold the Paris Agreement. He made lowering the cap a priority in his State of the State Address this past January. In a statement touting the decision, he said: “RGGI’s success exemplifies New York’s commitment to protecting the people of this state by showing the world that we will cut pollution and improve health, while transforming our economy into one that is cleaner, greener, stronger, and more sustainable than ever before.”
A bipartisan group, RGGI has helped the Northeast and Mid-Atlantic states involved significantly reduce their carbon dioxide emissions from the power sector. In New York alone, the program has contributed to an approximate 90% reduction in coal-fired power generation. Additionally, New York has benefitted from over $1 billion in RGGI proceeds, which is being used to fund more clean energy projects. Participating member states have seen substantial health benefits since the implementation of RGGI, with analyses showing 16,000 fewer respiratory illnesses and hundreds fewer heart attacks.
Even as Donald Trump attempts to force environmental progression to grind to a halt, it is clear that states can still make an impact and cut their own greenhouse gas emissions. The RGGI states’ commitment to this agreement sends a clear message to the federal government that the rest of the country will move forward in the fight against climate change, with or without its help.