Why have greenhouse emissions in RGGI states declined? An econometric attribution to economic, energy market, and policy factors

- We examine determinants of greenhouse gas emissions under a cap-and-trade system.
- We show that the policy lead to substantial reductions in emissions.
- Emission reductions may have been due to institutional factors, not the permit price.

The Regional Greenhouse Gas Initiative (RGGI) is a consortium of northeastern U.S. states that limit carbon dioxide emissions from electricity generation through a regional emissions trading program. Since RGGI started in 2009, regional emissions have sharply dropped. We use econometric models to quantify the emissions reductions due to RGGI and those due to other factors such as the recession, complementary environmental programs, and lowered natural gas prices. The analysis shows that after the introduction of RGGI in 2009 the region's emissions would have been 24% higher without the program, accounting for about half of the region's emissions reductions during that time, which were far greater than those achieved in the rest of the United States.