The third program review of the RGGI program was released in July 2025 and brings in many changes including a tighter emissions cap starting 2027, removes ECR, and adds additional Cost Containment. These changes come in the backdrop of significant challenges to decarbonisation as federal actions disrupt renewable energy, causing numerous wind projects to stall and constrain decarbonization efforts.
With this backdrop, cCarbon uses its CarbonOutlook model to present a demand-supply outlook under three scenarios till 2040 with short and long term projections for prices and emissions.

Executive Summary

Since its inception in 2008, the Regional Greenhouse Gas Initiative (RGGI) has reduced power sector emissions by more than 50% across participating states—significantly outperforming national averages—while generating over $8.6 billion for reinvestment in local energy efficiency, clean energy, and community programs. Emissions reductions have been primarily driven by fuel switching from coal to natural gas, followed more recently by the expansion of wind and solar generation.

In July 2025, RGGI concluded its third program review, introducing a tighter emissions cap alongside several structural revisions. Key updates include the removal of the Emissions Containment Reserve (ECR), an increase in the auction reserve price, and the addition of a new Cost Containment Reserve (CCR) tier. These adjustments were designed to strengthen market resilience and reinforce price signals under tighter cap conditions.

Despite these enhancements, significant policy headwinds pose challenges to achieving long-term program targets. As observed in several compliance markets, policy direction is increasingly shaping price formation and market expectations—often more decisively than emissions fundamentals alone.

Notably, there is no near-term pathway for Virginia or Pennsylvania to rejoin RGGI. More consequentially, recent federal actions have disrupted the decarbonization pipeline across member states. An executive order issued in April triggered a sharp decline in forward prices, though markets have since partially recovered. Additional federal policy shifts are expected to materially affect renewable energy deployment trajectories.

In particular, the rollback of Inflation Reduction Act (IRA) funding and associated wind and solar subsidies is likely to slow project development. Several wind projects at advanced stages of development have already been suspended or cancelled, signaling potential structural impacts on the regional emissions outlook.

This note models three scenarios. Two are based on RGGI’s prior workshop pathways—“Currently Contracted Renewables” and “Renewable Expansion.” However, our baseline case, aligned with the “AEO 2025” trajectory, is considered the most probable under current policy conditions. In this scenario, allowance prices are projected to exceed CCR trigger levels for most years beyond 2025. The alternative workshop scenarios appear increasingly unlikely given recent policy reversals, which have materially altered the emissions trajectories originally assumed.

Ultimately, RGGI’s effectiveness in the coming decade will depend on its capacity to adapt to a shifting federal and regional policy environment, while coordinating with emerging regulatory frameworks such as Cap-and-Invest programs to sustain durable emissions reductions and maintain market stability.

List of Figures

Figure 1: Emissions Across RGGI States ………………………………………………………………………………………….. 8
Figure 2: RGGI 2024 Emissions by State ………………………………………………………………………………………….. 8
Figure 3: Electricity Generation from Petroleum — H1 2023 vs. H1 2024 vs. H1 2025 ………….. 9
Figure 4: RGGI Prices Following Executive Order ………………………………………………………………………… 14
Figure 5: Managed Money CFTC Positions ………………………………………………………………………………….. 14
Figure 6: RGGI New Cap vs. Previous Cap ……………………………………………………………………………………. 20
Figure 7: RGGI New Cap vs. Previous Cap (Including CCR Volumes) ………………………………………. 21
Figure 8: Allowance Demand and Supply — Renewable Expansion Scenario ………………………. 26
Figure 9: Annual and Cumulative Allowance Surplus — Renewable Expansion Scenario …… 26
Figure 10: Allowance Demand and Supply — Currently Contracted Renewables Scenario …. 27
Figure 11: Annual and Cumulative Allowance Surplus — Currently Contracted Renewables Scenario ………………………………………………………………………………………………………………… 27
Figure 12: Allowance Demand and Supply — EIA AEO 2025 Scenario ………………………………….. 28
Figure 13: Annual and Cumulative Allowance Surplus — EIA AEO 2025 Scenario ……………….. 28
Figure 14: Total CO₂ Emissions (MMT) for New England and Mid-Atlantic — AEO 2025 Reference Case ………………………………………………………………………………………………………………… 29
Figure 15: CCR Deployment Across Modeled Scenarios …………………………………………………………… 30

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List of Tables

Table 1: H1 2024 and H1 2025 RGGI Emissions by State ……………………………………………………….. 8
Table 2: Sources of Electricity Generation in RGGI States …………………………………………………….. 9
Table 3: Electricity Generation from Petroleum in RGGI States …………………………………………… 10
Table 4: RGGI Emissions Scenarios …………………………………………………………………………………………….. 26
Table 5: Scenario Analysis Terminology ……………………………………………………………………………………. 27
Table 6: Modeling Key Takeaways ……………………………………………………………………………………………… 33
Table 7: Modeling Comparison — 2024 vs. 2025 …………………………………………………………………….. 35
Table 8: Long-Term Modeling Comparison — 2024 vs. 2025 ……………………………………………….. 36