For more than 15 years, Connecticut has been a participant in the nation’s first — and to date only — regional cap-and-trade program that seeks to lower greenhouse gas emissions. In order to continue participating the program for the next decade, however, Connecticut must make changes that will affect both the level of emissions reductions and the cost to consumers. The Regional Greenhouse Gas Initiative, or RGGI, is a partnership between 11 northeastern states to restrict how much carbon dioxide can be emitted by power plants throughout the region. Within Connecticut, the program is administered by the state’s Department of Energy and Environmental Protection. Connecticut first joined RGGI in 2009. Since then, the program has succeeded in reducing CO2 emissions from power plants by 47%, while also returning more than $627 million to state coffers to put toward energy efficiency programs, electric vehicle rebates and rate relief to electric customers, according to DEEP. Proposed updates to the RGGI program require states to reduce emissions by an additional 60% to 90% by 2037. Those targets are in tandem with Connecticut’s overall goal of getting all of its electricity from carbon-free sources by 2040. The proposed regulations include a new cost-containment strategy that would automatically relax those targets if the price of compliance becomes too high. In order to continue participating in the program, Connecticut must ratify the changes by Jan. 1, 2027. How does RGGI work? The program works by setting a cap on the total amount of CO2 emissions from power plants throughout the region. Once the cap is set, each participating state then holds an auction to sell “allowances” equivalent to one metric ton of CO2. Power plant operators who’ve purchased an allowance may emit that amount of carbon dioxide — or sell portions of the allowance to other plants. Hence the term “cap and trade.” There is no limit on emissions any one plant can release, so long as the owners purchase enough allowances to cover that amount. The goal, officials say, is to encourage owners to make investments allowing their plants to run cleaner and more efficiently. “It’s the market incentive for for pollution reduction,” said Bruce Ho, a senior policy advisor at DEEP’s Bureau of Energy and Technology Policy. Over time, the overall cap declines and the price of allowances rises, making it costlier for plants to produce emissions. The price of an allowance at the first ever auction, in September 2008, was $3.07. At the most recent auction, held in June, that price had risen to $35. What states are part of the RGGI? The current roster of participating states includes Connecticut, along with Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia. RGGI is the only regional program of its kind in the U.S. Some other states, such as California and Washington, operate their own programs. What is the impact on consumers? Power plant operators that have to purchase RGGI allowances are allowed to bake those costs into the wholesale price of electricity, which ends up getting passed along to utility customers. Those compliance costs have risen from about $3 per megawatt-hour in 2016 to $11 per megawatt-hour this year, according to a recent report from ISO New England. Critics of the RGGI program say it acts as a hidden tax on Connecticut’s electricity bills, which are among the highest in the nation. But supporters say those costs would be borne by electric customers even if the Connecticut opted out of the program, because wholesale electricity is bought and sold across state lines. In New England, where every state participates in RGGI, that wholesale price is further determined through a regional marketplace where all plants get paid the same rate per megawatt-hour of electricity they produce. And states participating in RGGI earn revenue from the sale of allowances. Those funds are put toward efficiency upgrades, clean energy programs or direct relief to help lower the cost of electric bills. Each state has discretion for how to spend their share of RGGI proceeds. As electricity costs have risen, some states have sought to use a greater share of the proceeds from RGGI allowances for ratepayer relief. In Rhode Island, for example, Gov. Dan McKee signed an executive order last month directing $28 million in RGGI funds to offset an expected winter rate hike. Ho said Connecticut is on pace to collect more than $100 million from the sale of allowances this year, of which at least $53 million will be directed back to ratepayers. Those revenues would go away if Connecticut opted out of the program. What changes are coming? In July 2025, states participating in RGGI jointly announced a plan to expedite the reduction of carbon emissions by up to 90% over the next decade. The proposed regulations would reduce the annual cap on power plant emissions by roughly 8.5 million tons of CO2 each year through 2033, with smaller reductions in subsequent years. The new rules also include an update to a mechanism in the program that’s intended to avoid price shocks. At certain times of year — particularly during winter, when dirtier fuels like oil and coal are burned in order to meet greater need — power plants’ demand for allowances rises, causing the auction price to do the same. The mechanism automatically makes more allowances available to buy when the price at auction passes a certain point. The additional allowances are available only until the price falls back below the threshold, or the reserve of extra allowances is depleted. Under the new system, states will have more reserve allowances to dip into when the price gets too high. In addition, officials added a second pool of reserves, which will be unlocked at a second, higher price threshold. In 2027, the first round of reserves would be released if the price-per-allowance hits $19.50 — then triggered again if the price hits $29.95. And the trigger point prices would rise each year by 7%. DEEP closed its public comment period on the program updates earlier this month. After reviewing those comments, the agency will submit its proposed regulations to the legislature’s bipartisan Regulations Review Committee for final approval by the end of this year. ...read more read less