Carbon credit prices dip slightly after more than tripling since 2020 By EPN Staff The price of carbon credits for power producers along the Eastern Seaboard dipped slightly in December after hitting a record high in September’s Regional Greenhouse Gas Initiative (RGGI) auction. The cost per carbon credit was $20.05 on RGGI’s December 4 auction, more than 3.5 times higher than it was five years ago. The credit market peaked in September, when credits sold for $25.75 each, marking the highest price per allowance since the program’s inception in 2008. How it works RGGI (pronounced “Reggie”) is a cooperative multi-state program requiring power plants in participating states to purchase one carbon dioxide allowance for each short ton of carbon that they emit, with the number of allowances released to the market decreasing slightly each year. The program creates scarcity in credits, which, combined with a steady increase in demand for power, has steadily driven up the price of each allowance since 2017. Eleven states have participated in RGGI since it began: Connecticut Delaware Maine Maryland Massachusetts New Hampshire New Jersey (which participated from 2009-11 and resumed participation in 2020) New York Rhode Island Vermont Virginia (which participated from 2021-2023) Why it matters Power producers buy the credits, and electric utilities pass along the cost of the allowances to ratepayers. For example, in 2023, Dominion Energy announced that Virginians would see a surcharge of $0.4425 cents per kilowatt hour to pay for RGGI costs. That equates to a monthly fee of $4.42 on a 1,000-kilowatt-hour monthly bill. The December 2024 auction generated $319,669,340 in total revenue for the 10 participating states. That is an increase of 434 percent over the past five years. In 2019, the same auction generated $73,583,250. Auctions are held quarterly. States typically use the bulk of revenue generated by the sale of carbon allowances to pay for energy efficiency initiatives, along with investments in clean and renewable energy and providing bill assistance for ratepayers. States that have received the most revenue New York ($1.6 billion) Maryland ($815 million) Massachusetts ($687 million) The bigger picture Advocates say the program has led to significant reduction in carbon emissions in participating states that would not have happened otherwise. Critics say that market competition and clean energy innovation have more effectively reduced CO2 emissions in both RGGI and non-RGGI states and allege the program is “adding to already high regional energy bills.” Virginia became the program’s first southern state in 2020 but Governor Glenn Youngkin issued an executive order in 2022, withdrawing Virginia from the program. Youngkin’s administration has described the fees as “a regressive tax, hidden in utility, bills passed on to all Virginians.” In November 2024, a Circuit Court judge ruled that Youngkin’s attempt to withdraw from RGGI was unlawful because the commonwealth’s participation had been initiated by the state legislature and couldn’t be nullified by the executive branch. Youngkin’s office has said they will appeal that ruling. Pennsylvania joined RGGI in 2022 but has not participated in auctions due to ongoing litigation. The Commonwealth Court of Pennsylvania ruled in 2023 that RGGI participation amounted to a new tax on Pennsylvanians and found that the program was unconstitutional, as taxation is within the sole purview of the General Assembly. Gov. Josh Shapiro has appealed that decision to the state Supreme Court, but a schedule has not yet been posted for oral arguments.
