The Regional Greenhouse Gas Initiative: The Invention of Cap-and-Invest
With member states achieving a 95 percent decrease in petroleum-based power generation and a 63 percent increase in non-hydro renewables in its first eight years, the Regional Greenhouse Gas Initiative (RGGI) is a prime example of a successful cap-and-trade, or in this case, cap-and-invest program. As part of the China-US Climate Change Action and Cooperation Workshop at Duke Kunshan University, David Farnsworth described U.S. experiences with the RGGI program and provided recommendations for Chinese regulators as they consider how to reduce carbon emissions at least cost.The cap-and-trade program is an evolving policy mechanism that can be adapted to help meet other public policy priorities. The RGGI program chose to auction carbon allowances rather than give them away, enabling investment of the auction proceeds in energy efficiency and other consumer programs. Other best practices include coordinating cap-and-trade policies with other strategies, such as energy efficiency, renewable energy, and demand response. A similar regional approach that coordinates energy and environmental policy can help regulators achieve an overall reduction of carbon emissions and—as is the case with RGGI, which raised over a billion dollars in quarterly auctions since 2009—potentially increase investment in clean energy and other programs.