Overview of Critical-Path Implementation Requirements

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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.

8. 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