For too long, American power plants have been freely polluting our atmosphere with climate-changing carbon dioxide (CO₂) pollution. This is about to change. The Regional Greenhouse Gas Initiative (RGGI) is a coalition of 10 Northeast and Mid-Atlantic states who are working together to put a price on pollution.

Background

There is no longer any debate. Carbon dioxide (CO₂) — along with a handful of other global warming gases — causes climate change. Electricity generation is our single largest source of CO₂ pollution, currently producing about 40% of our nation's total carbon dioxide emissions. Historically, power plants have emitted these vast quantities of climate-altering gases without penalty. This is about to change. Starting in 2009, ten Northeast and Mid-Atlantic states will require all major electricity generating power plants to purchase carbon dioxide emission allowances. The power plants will literally pay for permission to pollute.

What is RGGI?

The Regional Greenhouse Gas Initiative (RGGI) is the first program in the United States to require power sector polluters to pay for their carbon dioxide pollution. The ten participating states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont — will cap CO₂ emissions from their power sector at 118 million tons starting in 2009, and will require a 10 percent reduction in these emissions by 2018.

In the very first auction of its kind, RGGI auctioned off more than 12 million CO₂ emission allowances to 59 participating power plants on September 25, 2008. Each emission allowance permits the holding power plant to emit one ton of carbon dioxide pollution. For comparison, cars produce about one ton of CO₂ for every 100 gallons of gasoline. In its first auction, RGGI collected $3.07 for each emission allowance, netting $38,575,783 in proceeds.

A second auction will be held December 17. This will be the last auction prior to 2009, when RGGI will begin requiring emission allowances from their power plants.

Cap-and-Trade: Bidding and Trading for Carbon Credits

CO₂ cap-and-trade programs work by requiring power plants to acquire and hold credits that grant them permission to emit a certain amount of CO₂ pollution. By requiring the emission allowances, regulating organizations are essentially requiring polluters to pay for their emissions. Many believe power plants will not seriously begin reducing their CO₂ emissions until they are required to pay for them. CO₂ cap-and-trade programs are one way to do this.

RGGI is the very first cap-and-trade coalition to require power plants to actually pay for their CO₂ emission allowances. Other cap-and-trade programs have granted carbon credits based on past carbon emissions. By distributing CO₂ credits based on past emissions, this method essentially rewards the biggest polluters, while penalizing more efficient power plants. RGGI requires all power plants to purchase their emission allowances in auction, which immediately rewards power plants who identify and implement efficiencies.

In addition to quarterly auctions, RGGI-monitored power plants may also trade or sell emission credits with one another. This trading essentially puts power plants in competition with one another, encouraging each facility to maximize its own efficiencies so that it can sell excess emission credits to other power plants.

Consumers Benefit

The majority of RGGI auction proceeds will support the development of state and regional programs to develop renewable energy and identify and implement energy efficiencies. Such programs will help residents and businesses save energy, ultimately reducing their utility costs.

Learn more: Regional Greenhouse Gas Initiative