Overview of Critical-Path Implementation Requirements Infrastructure required for successful program launch includes: Emissions & Allowance Tracking System Auction Platform Administrative Materials to Support Emissions Offsets Component –model applications and submittal forms –guidance documents (general and category- specific) Process for Accreditation of Independent Verifiers for Offsets Projects

Emissions and Allowance Tracking System A secure software platform is needed to house and/or administer the following accounts and information: Emissions data reported by affected sources Allowance accounts for both affected sources and project sponsors of emissions offsets Allowance allocations to affected sources, either through an auction or directly to affected sources Offset allocations to project sponsors of approved emissions offset projects –Requires module for tracking status of individual offsets projects (e.g., project eligibility status and status of annual monitoring and verification reports) Allowance transactions among parties to facilitate trading Compliance true-up for affected sources and compliance certification by the applicable regulatory agencies

Auction Platform Implementation of an auction platform involves three components: Design of the auction Specification of auction software platform Rules for administration of auctions Research ongoing to provide detailed recommendations for each component to support policy decisions by RGGI Agency Heads

Offsets Implementation: Ensuring Regional Consistency Create infrastructure to assure regional consistency in implementation of offsets component of RGGI Proper functioning of the offsets component of RGGI requires consistent treatment by regulatory agencies across the region Development of model consistency applications, monitoring and verification submittal materials, and guidance documents support: –Expanded capacity for consistent, substantive, and timely review of each offset project and M&V submittal by regulatory agency staff –Assurance of environmental integrity of approved offsets projects –Minimization of transaction costs for offsets project developers

Offsets Implementation: Accreditation Process for Independent Verifiers of Emissions Offsets Offsets component of RGGI depends in part on the independent verification of offset project eligibility and submittals of monitoring and verification reports Assurance of environmental integrity, especially for a program administered with limited regulatory agency staff resources, requires: –high quality independent verifiers –process to evaluate potential conflicts of interest with respect to individual verifiers and offset project sponsors

Offsets Implementation: Accreditation Process for Independent Verifiers of Emissions Offsets Accreditation tasks include: Formalize accreditation application process for independent verifiers: –Establish process for review of qualifications of candidate verifiers –Establish process for evaluation of candidate verifier conflict-of-interest (COI) policy and protocols for remedying COI –Establish training course for candidate verifiers –Develop application materials for accreditation Formalize process for on-going regulatory agency review of conflict-of- interest situations –Establish submittal forms for accredited verifier disclosure of potential COI information, prior to engaging in work with an offsets project developer, to allow for COI review –Provide guidance to regulatory agency staff for review of COI

Offsets Program Development Development of standards for new offsets categories –Expansion of eligible types endorsed in MOU –Forestry management offsets working group is being lead by Maine –Development of other categories pending prioritization of next set of categories for regulatory development Development of model Memorandum of Understanding with other U.S. states Conduct periodic market evaluations of current eligible offsets categories –A standards-based offsets approach acknowledges that current market conditions must be periodically reviewed in order to maintain effective eligibility benchmarks and performance standards. –Recommendations for modifications to existing RGGI offsets standards may be made periodically based on these reviews if changing market conditions warrant.

RGGI Offsets Design Approach Use benchmarks and/or performance standards as proxies to infer financial additionality Examples: –Benchmark: qualitative eligibility criteria for a project that reasonably assures that project is unlikely under standard market practice For example, prohibition of receipt of both offset allowances and other attribute credits, such as RECs (or receipt of both only under certain limited conditions) –Performance standard: performance thresholds that exceed standard market practice (projects that exceed the standard are considered additional) Emission rate Energy efficiency criteria Market penetration rate