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 and the eleven Northeast states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia — that make up the Regional Greenhouse Gas Initiative (RGGI). 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 recently enacted new cap-and-invest legislation to take effect beginning in 2023.

Last updated in May 2021