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Trading and Compliance
How Does RGGI Work in Maryland?
The basic components of the Regional Greenhouse Gas Initiative (RGGI) include:
A regional, declining cap on CO
State distribution of allowances, including regional CO
Apportionment of regional auction proceeds to each participating state
Buying and selling of allowances on a secondary market
Accountability of regulated entities to their CO
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 CO
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 CO
budget sources. CO
budget sources are required to obtain CO
allowances for each short ton of CO
emitted over a three-year compliance period.
The cap-and-trade style program provides maximum flexibility to the CO
budget sources. Sources are able to determine the best ways to meet the program requirements, including:
Using alternative fuel sources that result in lower CO
emissions (e.g. switching from coal to natural gas),
Upgrading plant technology to reduce the amount of CO
emitted per unit of energy produced,
Adding renewable energy sources,
Increasing energy efficiency,
emissions by funding qualifying projects, and
allowances through the RGGI auctions or secondary markets.
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