How Does RGGI Work in Maryland?
The basic components of the Regional Greenhouse Gas Initiative (RGGI) include:
- A regional, declining cap on CO2 emissions
- State distribution of allowances, including regional CO2 allowance auctions
- Apportionment of regional auction proceeds to each participating state
- Buying and selling of allowances on a secondary market
- Accountability of regulated entities to their CO2 emissions over a compliance pe riod, based on surrender of allowances.
The Cap and Reductions
The RGGI program is based on a cap and trade model. Maryland's CO2 Budget Trading Program regulates emissions from fossil fuel-fired power plants with a capacity of 25 MW or greater located within Maryland. These are referred to as CO2 budget sources. CO2 budget sources are required to obtain CO2 allowances for each short ton of CO2 emitted over a three-year compliance period.
The cap-and-trade style program provides maximum flexibility to the CO2
budget sources. Sources are able to determine the best ways to meet the program requirements, including:
- Using alternative fuel sources that result in lower CO2 emissions (e.g. switching from coal to natural gas),
- Upgrading plant technology to reduce the amount of CO2 emitted per unit of energy produced,
- Adding renewable energy sources,
- Increasing energy efficiency,
- Offsetting CO2 emissions by funding qualifying projects, and
- Purchasing CO2 allowances through the RGGI auctions or secondary markets.