Mass. In States' Deal To Limit Power Plant Emissions02:27

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Nine northeastern states, including Massachusetts, on Thursday agreed to put significantly stricter limits on carbon dioxide emitted by power plants in the region. The pact could reboot a pollution cap-and-trade system — the Regional Greenhouse Gas Initiative.

RGGI, as it's known, was designed to reduce emissions of carbon dioxide, which traps heat in the atmosphere. Power plants in the member states are required to buy permits for CO2 they emit. There's a cap on the number of permits, a cap which grows more stringent over time.

The permits can be traded, and in theory prices should rise when demand exceeds supply, giving the power plants a financial incentive to invest in more benign technologies.

But since its inception in 2009, RGGI has not fulfilled its central promise, says Department of Environmental Protection Commissioner Ken Kimmell.

“There’s no question it’s been successful," Kimmell said. "But one thing it hasn’t done as effectively as it could is reduce emissions in a direct way.”

That’s because the initial limits proved too generous. Economic and weather conditions slowed energy demand. And the energy market was flooded by cheap natural gas, which, when burned, produces less CO2 than other fossil fuels. Last year, regional emissions were well below the existing RGGI cap, leaving little incentive to invest in cleaner energy.

So starting in 2014, Kimmel says the states will lower the cap to current emission levels. And they’ll drop it another 2.5 percent each year until 2020.

“We will see a reduction of emissions, we will see greater investment in energy efficiency, we will see continued acceleration, perhaps of the backing-down of coal plants," Kimmell said. "And we will see continued market penetration of cleaner fuel sources such as wind, solar, anaerobic digestion and hydroelectric power.”

Kimmell says that by 2020, power plant CO2 emissions in the member states will be half what they were in 2005. He says the program will add to electricity bills — about 40 cents a month for the average residential consumer, and more for businesses. But, he says, Massachusetts will earn hundreds of millions of dollars in fees charged for issuing the CO2 permits — funds he says that will be invested in money-saving energy efficiency programs.

This post was updated with the Morning Edition feature version.

This article was originally published on February 07, 2013.

This program aired on February 7, 2013.