RGGI Investment Proceeds Report Implications

Roger Caiazza
In July the Regional Greenhouse Gas Initiative (RGGI) organization released its annual Investments of Proceeds report. Cap-and-invest programs like RGGI are frequently touted as a program that will kill two birds with one stone. “It simultaneously puts a limit on the tons of pollution companies can emit — ‘cap’ — while making them pay for each ton, funding projects to help move the jurisdiction away from polluting energy sources — ‘invest.’” Advocates praise RGGI as a successful model for cap-and-invest programs citing observed emission reductions and the quantity of funds raised. This post checks those claims.
RGGI is a market-based program to reduce greenhouse gas emissions (GHG) (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008. New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 but has since withdrawn, and Pennsylvania has joined but is not actively participating in auctions due to on-going litigation.
Proceeds Investment Report
Earlier this year I reported on New York’s investment proceeds report. This post covers the RGGI 2023 investment proceeds report released on July 16, 2025. According to the press release: “In 2023, $852 million in RGGI proceeds were invested in programs including energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement, and direct bill assistance (Figure 1).”
Figure 1: RGGI Investments by Category
Source: RGGI 2023 investment proceeds report
The presse release goes on: “Over their lifetime, these 2023 investments are projected to provide participating households and businesses with $2.7 billion in energy bill savings and avoid the emission of 7.8 million short tons of CO2.” The report breaks down the investments into major categories. The 2023 investment report explains:
Energy efficiency makes up 64% of 2023 RGGI investments and 56% of cumulative investments. Programs funded by these investments in 2023 are expected to return about $1.9 billion in lifetime energy bill savings to more than 181,000 participating households and 1,083 businesses in the region and avoid the release of 5.3 million short tons of CO2.
Clean and renewable energy makes up 6% of 2023 RGGI investments and 12% of cumulative investments. RGGI investments in these technologies in 2023 are expected to return over $647 million in lifetime energy bill savings and avoid the release of more than 1.9 million short tons of CO2.
Beneficial electrification makes up 9% of 2023 RGGI investments 4% of cumulative investments. RGGI investments in beneficial electrification in 2023 are expected to avoid the release of 436,000 short tons of CO2 and return over $94 million in lifetime savings.
Greenhouse gas abatement and climate change adaptation makes up 2% of 2023 RGGI investments and 7% of cumulative investments. RGGI investments in greenhouse gas (GHG) abatement and climate change adaptation (CCA) in 2023 are expected to avoid the release of more than 49,000 short tons of CO2.
Direct bill assistance makes up 15% of 2023 RGGI investments and 15% of cumulative investments. Direct bill assistance programs funded through RGGI in 2023 have returned over $128 million in credits or assistance to consumers.
Emission Reductions
All my analyses of the RGGI Investment Proceeds reports have found the same results. First, since the beginning of the RGGI program, RGGI funded control programs have been responsible for a small fraction of the observed reductions – only 7.6% in 2023 (Table 1). Note that I only included the emissions from the nine states that have been part of RGGI since the start of the program to show the trend. However, the accumulated avoided CO2 emissions includes reductions from NJ and VA for the years they were active in the program, so these values over-estimate avoided CO2. RGGI reports hide this relatively small reduction by reporting lifetime avoided emissions, but emission reduction targets are considered relative to an annual baseline, so the sum of annual reductions shown here is the proper metric.
Table 1: State-Level CO2 Emissions for Nine RGGI States 2009 to 2024
Previous work has also found that the primary reason for the observed reductions has been fuel switching away from coal and oil to natural gas as shown in Figure 2 that shows emissions for nine-state RGGI. Importantly, the availability of potential fuel switching in the RGGI fleet of electric generating units is running out. Consequently, future reductions will have to rely on the deployment of zero-emission generating resources and load reductions which makes cost-effective emission investments important.
Figure 2: 9-State RGGI CO2 Emissions (tons per year) by Fuel Type
The importance of cost-effective investments for emission reductions is unacknowledged probably because I have always found that their cost per ton removed are high. I calculate cost effectiveness by dividing the RGGI total investments divided by the estimated avoided CO2 emissions. In 2022 the CO2 emission reduction efficiency was $949 per ton of CO2 reduced but in 2023 the cost per ton reduced increased to $1,854. Because there is no obvious change in investment strategies, I think the differences are due to changes in the calculation methodology. This cannot be confirmed because there is insufficient documentation.
Table 2: Accumulated Annual RGGI Proceeds, Avoided CO2, and Cost Efficiency
Emission Reduction Costs
RGGI is supposed to be an emissions reduction program. On July 3, 2025, RGGI announced the results of the Third Program Review that modified the requirements for future reductions. Based on my analysis of the planned revisions, the RGGI States only delayed the inevitable reckoning of the futility of this program to achieve the goal of a “zero-emissions” electric system. The RGGI summary of the revisions states that the revised mandated reductions will “decline by an average of 8,538,789 tons per year, which is approximately 10.5% of the 2025 budget” from 2027 to 2033.
The mandated reductions were based on the desire to reach zero emissions and not any feasibility analysis. Table 3 lists the cost per ton of CO2 removed of the RGGI investments from 2015 to 2023, the cost to reduce 8,538,789 tons per year using annual RGGI observed costs, and the RGGI proceeds for each year. In 2023 the Third Program Review mandated annual emission reduction multiplied by the cost per ton ($1,854) totals $15.8 billion but the RGGI proceeds were only $0.85 billion. Even using the cost over the entire period of $849 per ton, it would cost $7.25 billion to make the reductions mandated. This is still far short of the proceeds available and raises the question how this will get funded.
Table 3: Annual RGGI Cost Efficiency, Cost to Meet 2027 RGGI Annual Reduction, and Annual Proceeds
Table 4 describes other claimed benefits.
Table 4: RGGI Proceeds Report Investment Category Annual Totals
Cost Effectiveness Implications
The 2023 investment proceeds report breaks down the investments into major categories. This article compares the cost effectiveness of emission reductions for the following investment categories: energy efficiency, clean and renewable energy, beneficial electrification, greenhouse gas abatement and climate change adaptation. I calculated cumulative annual values for each category to provide the following summary (Table 5). Note that the overall cost effectiveness is $1,174 per ton avoided for these categories. Clearly the proceed investment strategy is not emphasizing emission reduction effectiveness. For example, even though bill savings of $924 million are claimed the total investments are $2,251 million. In my opinion, these numbers are inconsistent with claims that RGGI is successful.
Table 5: Summary of Recent RGGI Categorial Investments and Avoided Emissions Over the Last 6 Years
One of my big concerns about any cost on carbon emissions is that it is a regressive stealth tax on energy. There is a tradeoff between trying to minimize those impacts and reducing emissions. In the last six years $371 million or 16% of the RGGI auction proceeds went to direct bill assistance, which is good but that means that much less was available to reduce emissions. Throw in the $132 million over the last 6 years for administration that means that 23% of the RGGI auction proceeds were not used to reduce emissions. I think this is indicative of the issues with any cap-and-invest program. The invest goal of “funding projects to help move the jurisdiction away from polluting energy sources” becomes an afterthought and not a priority.
Discussion
I have been involved with RGGI since the beginning, and I have always been primarily concerned about compliance with the rules. As shown previously, there are limited opportunities to make further fuel switching changes. Affected sources only have one other control option: running less. Consequently, future reductions will have to rely on RGGI-funded programs that increase the deployment of zero-emission generating resources and programs that reduce load. If RGGI does not change its investment priorities to recognize the need to reduce emissions, there will come a time when the only compliance option available to affected generating plants is to reduce operations. That will create an artificial energy shortage.
Even if RGGI investment priorities are changed, there is the fact that the observed costs to reduce emissions are high. Historical results show RGGI investment proceeds can only fund a fraction of the 8,538,789 tons per year reduction mandated by their Third Program Review in 2027. The only way to fund the necessary reductions is to increase the proceeds by charging more for the allowances. At the same time the number of allowances sold annually will drop. The numbers just do not add up.
There is another cost effectiveness consideration. New York’s Value of Carbon guidance estimates that the 2025 cost to society for damages associated with emitting a ton of CO2 at a 2% discount rate is $133.75. Per this guidance, when used for a damages-based approach to valuing greenhouse gas emissions, the value of carbon provides a monetary estimate of the impacts on society from activities that are a source of greenhouse gas emissions. The estimated emission reductions cost per ton removed exceeds that limit for every year and every investment category. This suggests that the emission reduction costs exceed the societal benefits expected.
Conclusion
These results support my conclusion that RGGI can only claim to raise money effectively. Claims that RGGI is a successful emission reduction program are inconsistent with the following observations. The investment costs exceed the expected societal benefits. The amount raised falls far short of the funds necessary to reduce RGGI emissions in accordance with Third Program Review requirements. Investment priorities are inconsistent with the emission reduction objectives. Finally, emission reductions associated with RGGI investments only account for 7.6% of the observed reductions.
These results have important implications because I believe that they represent systemic issues with the cap-and-dividend emission reduction approach. Unfortunately, I don’t think that RGGI will fail before others, including New York State, try to implement similar schemes based on the “successful” RGGI model.
Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York. Dealing with the RGGI regulatory and political landscapes is challenging enough that affected entities seldom see value in speaking out about fundamental issues associated with the program. He has been involved in the RGGI program process since its inception and has no such restrictions when writing about the details of the RGGI program. This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.