The Regional Greenhouse Gas Initiative (RGGI) - or "Reggie" - is the cap and trade system being established between 7 Northeastern US states - Maine, New Hampshire, Vermont, Connecticut, Delaware, New Jersey and New York (with Maryland committed to joining by 2007).
In December 2005, the states agreed to a memorandum of understanding committing to the system, and in March ’06 they released a draft for comments. After public input, they’ve come to a revised version, which has been well recieved - in particular because it allowed for off-sets.
Here are the main aspects:
- The first period will run between 2009 and 2015, capping CO2 emissions at approximately current levels – 121 million tons per year
- After that there will be 4-year periods with tighter caps – the second period will require 10% emissions cuts by 2019
- Coal-, oil- and gas-fired electric power plants with a capacity of 25 megawatts or more are covered under RGGI
- These plants can trade credits – sell extras if their emissions are under their allowance, or buy on the market if they are over
- At least 25% of the allowances have to go to strategic energy initiatives such as efficiency programs, clean energy tech, etc
- Off-sets generated by non-electric projects – such as methane capture from agriculture or landfill projects
- Off-set credits can come from anywhere in the
– and can be used to meet up to 3.3% of their emissions US
- Unless the price for a ton of carbon rises above $7, in which case they can account for 5%
- Above $10, they can account for 10%, and credits from international schemes (e.g. the EU ETS) can be used as well
All-in-all, the actual reductions are quite modest – and it looks as though they’ve set it up so that the prices will be quite low, and with the offsets, there will probably be a glut of supply early on (as we’ve seen in the EU ETS – allocations were too large, and most emitters came in well under expectations). But the big thing is that the system is being set up – the kinks will get worked out, and businesses can finally start planning strategically for the reality of a fossil-free future.
Check out the press release for more details:
And the Reggie page for more info: