NEW YORK – The Regional Greenhouse Gas Initiative is slated to start on Jan. 1, but the process began today, with the auction of the first carbon permits by World Energy (TSX: XWE). The energy-auction administrator heralded the sale as the first carbon-dioxide cap-and-trade auction in U.S. history.
The initiative is described by the RGGI coalition as “the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions.” Under the RGGI process, the 10 participating states agreed to stabilize power-sector carbon emissions at their capped level by 2014. Thereafter, the cap will be reduced each year from 2015 through 2018, by a total of 10 percent.
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By beginning now, the participating states – Rhode Island, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York and Vermont – have exceeded the commitment made in 2005 by the participating states, in which they agreed to have a program in place by the beginning of 2009.
“It’s very exciting that the RGGI process is finally moving toward getting the carbon reductions we’ve been talking about for years,” Cynthia Giles, director of the Conservation Law Foundation’s Rhode Island office, had said this summer, after RGGI announced plans for today’s initial auction. (READ MORE)
In today’s sale, RGGI is offering more than 12.5 million CO2 allowances, including allowances issued by Rhode Island, Connecticut, Maine, Maryland, Massachusetts and Vermont. A second RGGI auction is slated for December, with quarterly auctions planned thereafter.
Money from the sale of carbon credits – essentially, permits to pollute – will go “to support low-carbon-intensity solutions, including energy efficiency and clean renewable energy, such as solar and wind power,” according to the RGGI Web site.
“This first RGGI auction is a historic moment,” RGGI’s Executive Director Jonathan Schrag said in a statement today. “The auctions will spur innovation in the energy sector and we anticipate strong interest from bidders. The qualification process is extremely important, so I urge potential bidders to take advantage of the information and technical assistance being made available online today.”
The Pew Center, a policy group whose Center on Global Climate Change served as a member of a technical resource panel that in the auction’s design, echoed his comments, saying: “Today marks an historic milestone for U.S. climate action.
“The start of the Regional Greenhouse Gas Initiative (RGGI) auction of emission allowances demonstrates both how far we’ve come and how far we need to go to effectively address climate change,” the group said.
“These states are paving the path to a comprehensive national program that offers the most cost-effective solution to significantly reduce U.S. greenhouse gas emissions,” the Pew Center added. “As we await the new administration and Congress, RGGI leads by example to show government and business leaders that cap and trade is a manageable, economically-efficient approach to reduce GHG emissions.”
“With industry experts projecting the total global carbon market to exceed $1 trillion by 2020, it is critical that the United States be on the forefront of market-based reductions in greenhouse gas emissions,” World Energy said.
The company was hired to run the auction by RGGI Inc., the nonprofit corporation created by the participating states to administer their carbon-trading program. Those states “have cooperatively developed the first mandatory, market-based CO(2) emissions reduction program in the United States,” World Energy said.
Actual prices from today’s auction will be posted on Monday, RGGI said.
Organizers have set a floor price of $1.86 per ton. But Emmanuel Fages, a research analyst for France’s second-largest bank, the Societe Generale, predicted regional carbon-dioxide credits might fetch prices of $3 to $5 per ton in today’s auction, according to Bloomberg News.
The allowances are being auctioned “ to prevent windfall profits” for utilities, Societe Generale’s Fages wrote in an e-mail note to investors yesterday, adding that regulators may have oversupplied the system “to dampen the costs for the industrials covered.” Power stations covered by the RGGI program may emit 150 million tons this year, 20 percent less than the program cap, Oslo research and publishing group Point Carbon said in a report last week.
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative cap-and-trade effort of 10 states in the Northeast and Mid-Atlantic regions. Its carbon-trading program is administered by the Regional Greenhouse Gas Initiative (RGGI) Inc., a nonprofit corporation created by the 10 participating states. Additional information is available at www.rggi.org.
