Compared to command-and-control regulations, carbon pricing is a market-based mechanism that creates financial incentives to reduce greenhouse gas (GHG) emissions. Twelve states that are home to over a quarter of the U.S. population and account for a third of U.S. GDP have active carbon-pricing programs and are successfully reducing emissions. Those states are California, Washington, and the eleven Northeast states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont — that make up the Regional Greenhouse Gas Initiative (RGGI). (Pennsylvania is a participating state in RGGI, but is currently not participating due to litigation.)

RGGI is the first mandatory cap-and-trade program in the United States to limit carbon dioxide emissions from the power sector. California’s program was the first multi-sector cap-and-trade program in North America. Massachusetts has also implemented regulations to establish an additional cap-and-trade program for its power sector that runs in parallel with RGGI but extends out to 2050. Washington state enacted new cap-and-invest legislation that took effect in 2023. New York is preparing an economy-wide cap-and-invest program that is expected to launch in 2025, either in addition to its RGGI participation or in place of its RGGI participation. And Oregon has started a rulemaking process to reestablish a program that places a declining cap on emissions associated with fossil fuel combustion in the state.

Last Updated May 2024