Imagine a world where both major presidential candidates agree that climate change is a serious problem, and they want to use the same policy to address it.

This was a real thing in 2008.

Democrat Barack Obama and Republican John McCain, who were both U.S. senators at the time, disagreed on some details, but they agreed that a national cap-and-trade system could push power plants and other industries to lower their carbon emissions.

Spoiler alert: Their proposals never made it through Congress.

But, shortly after the 2008 election, ten states on the East Coast booted up a cap-and-trade system of their own, called the Regional Greenhouse Gas Initiative (RGGI). It’s a voluntary program; states can join or leave as they choose. And though it’s been running for sixteen years, RGGI made some headlines this fall.

Pennsylvania Gov. Josh Shapiro signed a budget bill last month that will keep the Keystone State out of RGGI. Meanwhile, Virginia Governor-elect Abigail Spanberger has said she intends to rejoin it, after the current governor pulled the state out.

So, how does cap-and-trade work again? Unless you’re very steeped in energy policy, you’re forgiven for not remembering.

To explain, Peter Shattuck at the energy consulting firm Power Advisory has an analogy: “Let's say, for whatever reason, we wanted to reduce the amount of dining out. You'd set an overall cap on the number of meals out.”

Then, you’d sell passes to people who want to eat at restaurants. But, you’d reduce the total number of passes available over time. So want-to-be diners would bid up the price for them — supply and demand.

“It would create an incentive to do other things, like eat at home,” Shattuck said. “And if you reuse the revenue raised by selling the passes in stocking people's kitchens, then it would be all the more appealing to eat at home, and we'd reduce the amount of dining out.”

This, but for carbon dioxide emissions from power plants. That’s what RGGI does.

Owners of fossil fuel plants in RGGI states have to buy a permit to emit one ton of CO2. The total number of permits available declines over time. So, they’re incentivized to switch to forms of energy that don’t emit carbon. The money they pay for permits goes back to states, which use the funds for energy efficiency programs, clean energy development, or even rebates for consumers’ electric bills.

Sixteen years in, it’s worked pretty well. 

Carbon emissions from electricity generation in the RGGI states have dropped significantly, according to RGGI’s executive director Andrew McKeon.

“If we're looking at all the states that participated in RGGI, from 2009 to the present, we're looking at about a 53% [carbon emissions] reduction through 2024,” McKeon said.

But RGGI can’t take all the credit for that reduction.

“It's important to remember that RGGI launched right at the same time as the fracking revolution came about,” said Sam Evans-Brown, executive director of Clean Energy New Hampshire.

Fracking made natural gas abundant and cheap in the U.S., and natural gas emits less carbon than coal or oil. So as power companies switched from coal and oil to gas, they suddenly didn’t need nearly as many carbon permits as the states in RGGI had expected.  

So, RGGI states pushed down their cap on carbon permits even more. Their most recent adjustment to the cap came this past July. And over time, the price of RGGI’s carbon permits rose. They’re now going for about $22 per ton, about 10 times higher than in RGGI’s early auctions.

Evans-Brown said that could have an impact.

“This could be the time that RGGI is starting to become a price signal that will be meaningful enough that it'll drive new renewable generation onto the grid,” he said.

But that price signal, putting an extra cost on energy sources that emit carbon dioxide, is also what’s made RGGI a political target over the years — most recently, in Pennsylvania.

“Carbon pricing makes the cost of compliance visible, makes it easy for opponents to organize against those policies," said Danny Cullenward, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania.

That visible cost has always made cap-and-trade a hard sell. Which is why, Cullenward said, cap-and-trade can’t be the only way states and countries try to tackle climate change.