On 15 March 2021, the Regional Greenhouse Gas Initiative (RGGI), a market-based program covering emissions of the electricity sector in 11 Northeastern and Mid-Atlantic US states, announced its Third Adjustment for Banked Allowances, which will apply over a five-year period (2021-2025) and result in an annual cap reduction of 16-18%.

The downward adjustment of the RGGI cap accounts for the surplus of banked allowances accumulated by covered entities in the fourth control period (2018-2020) and aims at reducing the amount of allowances available for auctions in future years by the amount of allowances not used for compliance in previous years. The third cap adjustment comes as one of the results of the 2017 program review, with the adjustment based on the size of the bank as of 15 March 2021.

The adjustment will reduce the cap by 19.09 million short tons CO2 (17.31 MtCO2) annually, amounting to a total reduction of 95.45 million short tons CO2 (86,59 MtCO2) over the five-year period and resulting in a 2025 cap of 86.06 million short tons CO2 (78.07 MtCO2). The adjusted 2025 cap will be 18% lower than the unadjusted 2025 cap.

Guest post from ICAP