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.