RGGI Investment Report Lessons for Cap and Invest Programs


by Roger Caiazza at wattsupwiththat.com

Cap-and-invest emission reduction programs are supposed to effectively reduce emissions and generate revenues.  The Regional Greenhouse Gas Initiative (RGGI) is an electric sector cap-and-invest program in the NE United States that can provide insight into the potential of these programs.  This post reviews the latest RGGI annual Investments of Proceeds report to determine how well the investments are producing emission reductions and the lessons that should be kept in mind from the observed results.


RGGI is a market-based program to reduce greenhouse gas emissions. According to RGGI:

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia to cap and reduce power sector CO2 emissions. 

RGGI is composed of individual CO2 Budget Trading Programs in each participating state. Through independent regulations, based on the RGGI Model Rule, each state’s CO2 Budget Trading Program limits emissions of CO2 from electric power plants, issues CO2 allowances and establishes participation in regional CO2 allowance auctions.

RGGI Proceeds Investment Report

The 2021 investment proceeds report was released on June 27, 2023.  According to the press release:

The participating states of the Regional Greenhouse Gas Initiative (RGGI) today released a report tracking the investment of proceeds generated from RGGI’s regional CO2 allowance auctions. The report tracks investments of RGGI proceeds in 2021, providing state-specific success stories and program highlights. The RGGI states have individual discretion over how to invest proceeds according to state-specific goals. Accordingly, states direct funds to a wide variety of programs, touching all aspects of the energy sector.

In 2021, $374 million in RGGI proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement, and direct bill assistance. Over their lifetime, these 2021 investments are projected to provide participating households and businesses with $1.2 billion in energy bill savings and avoid the emission of 4.4 million short tons of CO2.

I reviewed the report on my blog.  I did not submit that review for publication here because there was nothing notably different in the annual claims that RGGI successfully provides substantive emission reductions.  The avowed purpose of the program is to reduce CO2 from the electric generating sector to alleviate impacts of climate change and the report provides data to support its “success”.  However, the report does not directly provide the information necessary to determine annual emission reductions that can be used to compare with emission targets.  New York, for example, has targets based on 2030 emissions relative to a 1990 baseline.  Lifetime emission reductions are irrelevant to evaluate the status of that metric.

The press release and report claim 4.4 million short tons of avoided lifetime CO2 emissions.  However, the sum of the annual CO2 emissions reductions is only 235,229 short tons.  I found that since the beginning of the RGGI program RGGI funded control programs have been responsible for 6.7% of the observed reductions.  When the sum of the RGGI investments is divided by the sum of the annual emission reductions the CO2 emission reduction efficiency is $927 per ton of CO2 reduced.  I concluded that although RGGI has been effective raising revenues, it is not an effective CO2 emission reduction program.

New York is planning its version of cap-and-invest and when I started an evaluation of the different investments made, I wanted to make the point that some investments are more appropriate than others because of cost-effectiveness differences.  During the analysis I realized that there were lessons to be learned that are relevant to all these programs so I submitted this article for publication here.

RGGI Investment Summary

The 2021 investment proceeds report (“Investment Report”) breaks down the investments into five major categories.  I summarized the claimed benefits of the RGGI investments in Table 1.  The Investment Report only lists the percentage of revenues for each category so I calculated the investments per category by multiplying the total revenues by each percentage share.

In the following sections I discuss the results for each sector. 

Energy efficiency

The Investment Report states:

Energy efficiency remains the largest portion of 2021 RGGI investments, at 51%. Over the lifetime of the installed measures, 2021 RGGI investments in energy efficiency are projected to save participants over $417 million on energy bills, providing benefits to more than 34,000 participating households and 570 participating businesses. They are also projected to avoid the release of 2.3 million short tons of CO2 (see Table 2).

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