After more than 18 months of stakeholder meetings and technical modeling, the Regional Greenhouse Gas Initiative officially concluded its program review, setting into motion the individual processes for each of the nine member states to approve the final rule that would bring about changes to the program in 2021.
At the end of August, the RGGI states proposed a series of changes to the regional cap-and-trade program, including a cut to the emissions ceiling by an additional 30% by 2030, relative to 2020 levels. Under the proposal, the RGGI cap would decline by 2,275,000 tons of CO2 per year, from 2021 through 2030, yielding a total reduction of 22,750,000 tons of CO2, or 30% of the 2020 cap. The model rule also contains language to address the private bank of allowances through one additional budget adjustment that would be implemented from 2021 to 2025.
Other proposed changes to the RGGI program after 2020 include implementing an emissions containment reserve, or ECR. The ECR would allow states to hold a portion of their annual emissions allowances in reserve, restricting the sale of those allowances when prices fall below certain predetermined levels.
The states implementing the ECR will withhold up to 10% of the allowances in their base budgets each year. The ECR trigger price will be $6.00/ton in 2021 and will rise at 7% per year. Maine and New Hampshire do not intend to implement an ECR at this time.
Additionally, the RGGI states have proposed cost containment reserve, or CCR, prices from 2021 through 2030. The reserve is a fixed additional supply of CO2 allowances that is only accessed if the interim clearing price exceeds the cost containment reserve trigger price for a particular year. The proposed CCR size from 2021 onward will be 10% of the regional cap. The CCR trigger price will be $13.00/ton in 2021 and will rise at 7% per year.
It is hoped that all state statutory and regulatory amendments needed to adopt the model rule will be completed by January 2019, with program changes to be in place and effective by January 2021.
RGGI is composed of Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. They use a market-based cap-and-trade program to reduce greenhouse gas emissions from regional power plants, selling nearly all emissions allowances through auctions and investing proceeds in energy efficiency projects.
According to economic modeling released Dec. 19 by ICF International, the RGGI region is likely to initially see "slight negative economic impacts" from the model rule implementation of the cap reduction before they "quickly grow to small but consistent economic benefits" generally due to the reinvestment of allowance auction proceeds. These do not include health, environmental and climate-related benefits due to emission reductions.
"RGGI continues to set the standard for state climate action. The rule released will slash carbon pollution, create thousands of new jobs and grow the region's economy, while protecting public health and saving lives," Jackson Morris, director of the Eastern Energy Project at the Natural Resources Defense Council, said in a Dec. 19 news release. "With New Jersey and Virginia poised to join, these benefits will further grow. As the states move next to tackle the largest source of carbon pollution in the region — the transportation sector — RGGI offers an attractive model they could use to modernize mobility, grow the economy, and further clean up our air."