The Regional Greenhouse Gas Initiative (RGGI) cuts climage-changing pollution from power plants, sets us on a path toward a clean energy future, and harnesses the power of the free market to reduce pollution in the most cost-effective way.
RGGI protects our health and environment while making Maine more efficient and creating new business opportunities. RGGI is a cooperative market-based effort among nine states to reduce climate-changing carbon pollution from power plants and spur investments in energy efficiency and clean energy.
Maine joined RGGI in 2007, when the Legislature voted nearly unanimously to participate. The program took effect in 2009, and today RGGI is delivering a cleaner, more efficient electricity sector, and a more energy-independent and competitive economy for Maine.
RGGI creates incentives for energy efficiency and clean, renewable power – good for our health and a necessary step to achieve our energy independence. Read our fact sheet about RGGI benefits.
Allowance auctions have taken place quarterly since September 2008, generating approximately $51 million for Maine[1]. The Efficiency Maine Trust determines how the revenue generated from the sale of credits can be best used for energy efficiency programs and carbon savings. Energy efficiency investments from the auction help reduce energy costs for Maine people and businesses. By law, Maine invests all RGGI revenue into energy efficiency programs and investments. During the first three years (2009-2011)[2], Maine invested $27 million from its sale of carbon credits in energy efficiency projects, generating $80 million in reduced electric bills for Maine businesses and people. This activity added a total of $92 million to Maine’s economy, including more than 900 jobs. This 4-to-1 Benefit-Cost ratio is the highest in the RGGI region.
RGGI provides numerous economic benefits by stimulating economic investment and supporting energy efficiency and renewable energy technologies.
RGGI presents an opportunity to save residential, commercial, and industrial customers on electricity bills and help protect against rate increases. RGGI generates an “energy fund” to help households and businesses save money and invest in energy efficiency. Starting in 2013, this fund includes the Home Energy Savings Program (HESP), which helps Maine people lower their home heating costs with weatherization and efficient heating systems. RGGI creates a new “carbon market” in the Northeast, with opportunities for everyone from dairy farmers to high-tech companies able to cash in. It will help Maine companies compete in the global economy, including places like Europe and Japan, which have already taken actions to combat global warming.
Key Lessons from RGGI
- RGGI has reduced pollution while measurably strengthening the Maine economy by reducing energy costs and creating jobs.
- Maine has used RGGI to generate $257 million in energy cost savings.
- RGGI has used public investments to leverage tens of millions of dollars s economy, including in the manufacturing sector.
- RGGI is providing significant benefits to Maine homeowners by supporting cost-effective weatherization and home efficiency improvements.
- RGGI was developed when environmental and business leaders worked together with legislators, in a bipartisan manner, to fashion an approach that worked for Maine.
- RGGI’s regional approach is the most cost-effective way to reduce pollution.
How Does RGGI Work?
In this “cap and trade” program, power plants are required to hold a credit (or “allowance”) for each ton of global warming pollution they emit. The states put an absolute limit on pollution levels by “capping” the total number of allowances allowed. The states initially auction a fixed quantity of allowances, but then power plants and others can “trade” allowances. The states will gradually reduce the number of allowances auctioned each year, lowering the cap to reduce pollution. In 2013, the states agreed to lower the global warming pollution level (“cap”) to keep pace with actual pollution levels and ensure that RGGI will drive down pollution levels in the region.
RGGI is an effective and practical solution to address global warming. The program is one of the most important steps in Maine’s Climate Action Plan, our state’s plan to reduce greenhouse gas emissions. It also creates incentives for energy efficiency and clean, renewable power – good for our health and a necessary step to achieve our energy independence. The initiative increases Maine’s impact by joining with nine other northeastern states. Together these states, add up to the seventh largest source of global warming pollution in the world. More than 30% of this pollution comes from dirty power plants.
Why Does RGGI Use a “Cap & Trade” Approach?
Economists and businesses have advocated for “cap-and-trade” systems for a long time because they can save money.
The “cap” means that the program sets an overall limit on the amount of pollution (in this case, carbon dioxide, or CO2) that can be emitted by power plants. The cap in Maine started at 6 million tons of CO2 per year and in 2013 was reduced to 3.3 million tons—that means that there are 3.3 million permits, or “allowances,” available.
Each power plant has to acquire enough permits to cover its emissions or face heavy fines, but they can “trade” or sell them among themselves. This program reduces global warming pollution because over time, the state eliminates some of the permits, setting a predictable schedule for requiring power plants to reduce their emissions, and allowing power plants to figure out themselves how to do this most cheaply.
Traditional regulation works differently—it sets a specific limit of pollutant for each source, or requires polluters to use a specific technology. In many cases, this is appropriate—especially when the pollutant is highly toxic (like mercury) or has local impacts (like phosphorous in a river). CO2 is not toxic and has no direct local impacts, making it a perfect candidate for a cap and trade approach. It doesn’t matter where we reduce pollution, as long as we start doing it today!
What are RGGI’s Economic Benefits?
- Increased investment in energy efficiency for homes and businesses—cutting home heating bills and lowering electric costs for everyone from manufacturers to school districts to “Mom & Pop” convenience stores.
- Energy efficiency means a reinvestment in Maine businesses and manufacturing facilities—making it more likely that they will stay in Maine and create jobs.
- Creates a framework for making good decisions about our energy system. Choosing clean energy sources that produce less global warming pollution today will decrease our reliance on foreign fossil fuels and help lower long-term energy costs.
- Leaves more money in Mainers’ pockets to spend on other products and services, increasing economic activity.
Businesses Support RGGI and Power Plant Global Warming Reductions:
“As one of the country’s largest generators of electricity, Entergy considers climate change to be among the most significant long term issues facing policymakers today. … RGGI can improve our global environment without sacrificing electricity reliability and affordability that is essential to State and broader RGGI region.” —Gary Serio, VP for Safety and Environment, Entergy
“We see RGGI as an important component in the region’s economic growth and development of renewable energy products to reduce the region’s impact on climate change…We believe that flexible market mechanisms will deliver cost-effective emissions reductions.”
—Mark Buckley, VP for Environmental Affairs, Staples
“We’re talking about the type of business issue that comes along perhaps once in a century. Those companies and industries which deny the issue will be marginalized and ignored.”
—David Crane, Chief Executive, NRG
“The approach developed through the Regional Greenhouse Gas Initiative rewards innovation and demonstrates that the region can address climate change using a market-based approach.” —Bank of America
[1] As of March 2014. View current data.
[2] Analysis Group, The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast and Mid-Atlantic States, Review of the Use of RGGI Auction Proceeds from the First Three-Year Compliance Period, November 15, 2011. (Full report, fact sheet, and Maine data)
