Earlier this month, the Regional Greenhouse Gas Initiative (RGGI) announced the completion of the RGGI Third Program Review, which resulted in several major changes to the RGGI Model Rule that will shape the program through 2037. These program changes, once adopted by participating states, will substantially reduce the regional carbon dioxide (CO2) emissions cap, overhaul price protections, and simplify compliance requirements. The completion of the Third Program Review and the announcement of changes to the Model Rule set a clear path forward for RGGI, and signal that participating states remain committed to RGGI. This post details key changes made to the Model Rule.
The revisions of the Model Rule come at a pivotal moment for RGGI and climate action in the United States. In April 2025, President Trump issued Executive Order No. 14260, which criticized state-level climate initiatives and directed the U.S. Attorney General to challenge state actions that conflict with federal energy policy. While the impact of that order still remains to be seen, legal challenges to RGGI remain possible. Fortunately, RGGI leaders and participating states are seemingly (and, in our minds, appropriately) undeterred by those federal headwinds:
- RGGI Board Chair and Massachusetts Department of Energy Resources Commissioner Elizabeth Mahony noted that the new reforms “will ensure our consumers enjoy the economic and environmental benefits of clean, more affordable energy. The RGGI has a proven track record of delivering big benefits for our states for more than 15 years, and today we are putting it on track to continue those benefits for years to come.”
- RGGI Board Vice Chair and Maine Public Utilities Commission Chairman Philip Bartlett said: “Our states’ commitment to collaboration and regular review has made RGGI into America’s most enduring and successful multistate initiative on clean energy. The RGGI states are proud to show the country, and the world, what we can accomplish when we work together to benefit consumers and fight climate change.”
- Doreen Harris, President and CEO of NYSERDA, said: “With a focus on energy affordability, the bipartisan initiative [RGGI] will deliver long-term commitments to improving public health and protecting the environment in NY and the surrounding region. NY, along with the other RGGI states, will continue to invest auction proceeds into programs that lower electricity bills, provide economic benefits to local communities and support a thriving business climate and workforce.”
Key Changes to the Revised RGGI Model Rule
- Stricter Emissions Cap: The revised Model Rule lowers the 2027 CO2 allowance budget to just under 70 million tons, a reduction of almost six million tons from the 2027 level under the prior model rule. The new CO2 cap will drop by an average of 8.5 million tons per year from 2027 through 2033, and then by an average of 2.4 million tons per year through 2037, settling at about 10 million tons. The CO2 cap after 2037 will be determined in the next RGGI Program review. No changes are made to banked allowances, which continue to be available for compliance.
- Enhanced Price Protections: The revised Model Rule increases the size of the Cost Containment Reserve (CCR), designed to protect against cost volatility, and creates a second-tier reserve of allowances to be released if the auction clearing price exceeds a higher trigger level. The Model Rule eliminates the current Emissions Containment Reserve (ECR) mechanism—which withholds allowances if the clearing price falls below a trigger—and replaces it with a higher minimum reserve price.
- Elimination of Project Offsets: Beginning in 2027, offset allowances will no longer be awarded, though previously awarded offsets may still be used, subject to existing limitations.
- Program Streamlining: The revised Model Rule also clarifies definitions and attempts to streamline monitoring, reporting, and recordkeeping requirements.
What’s Next?
Each participating RGGI state will now need adopt the revised Model Rule through their own legislative or regulatory process. Looking ahead, the Fourth Program Review will begin in 2028, giving stakeholders an opportunity to help shape RGGI’s post-2037 commitments. The Fourth Program Review will also evaluate the performance of the revised Model Rule discussed in this post. RGGI has indicated that the new CO2 cap schedule may be adjusted if necessary to ensure reliability and affordability.
While it remains to be seen whether the Trump administration will mount a legal challenge to RGGI, the revised Model Rule sets a clear framework for future emissions reductions and demonstrates the region’s continued commitment to climate action and clean, affordable energy.
Brett Reilly, a summer associate, participated in co-authoring this blog post.
