The states participating in the nation’s first cap-and-trade system for greenhouse gases conducted their fifth regional auction of carbon dioxide (CO2) allowances last Wednesday. The auction marks one year since the debut of the Regional Greenhouse Gas Initiative (RGGI) auctions and brings the total amount of proceeds to more than $432.7 million since September of 2008.
Wednesday’s auction yielded a total of just over $66 million from the sale of 28.4 million allowances for the 2009 vintage at an average price of $2.19 per ton, and 2.2 million allowances for the 2012 vintage at an average price of $1.87 per ton.
Both the price and quantity of allowances was down from the previous auction in June, when 30.9 million 2009 allowances went for an average price of $3.23.
Nonetheless, RGGI members celebrated the systems success at the one-year mark. Trading volumes on national, regulated exchanges now match volumes in other established carbon markets, such as the Kyoto Clean Development Mechanism, RGGI said. And every major power plant in the 10-state RGGI region now reports quarterly CO2 emissions to the public in an emissions and allowance tracking system.
“Once again the RGGI auction was a success, with demand running much higher than supply and compliance entities getting most of the allowances," said Pete Grannis, Commissioner of the New York Department of Environmental Conservation and Chair of the Regional Greenhouse Gas Initiative, Inc. Board of Directors. "RGGI has established a price for carbon, demonstrated that auctions are an efficient and effective way to allocate CO2 allowances and enabled the states to return millions of dollars in benefits to consumers through investment in energy savings and clean energy."
In a 2005 Memorandum of Understanding the states committed to use at least 25% of their allowance budgets for consumer benefit programs. In practice, the states have chosen to auction nearly all of the allowances and invest the proceeds in energy efficiency, renewable energy, technology development, and other programs that return the value of the allowances to consumers. Overall the states are investing the vast majority of proceeds in energy efficiency.
“The states participating in RGGI are investing auction proceeds in energy efficiency programs as the most effective way to manage energy demand while making the transition to a clean energy economy," said Mark Mauriello, Commissioner of the New Jersey Department of Environmental Protection and Director of the Regional Greenhouse Gas Initiative, Inc. Board of Directors.
A report by the New York State Energy Research and Development Authority forecasts that RGGI-funded energy efficiency measures will save New York’s consumers more than $1 billion over the lifetime of the installed measures. Similarly, data filed by Massachusetts utilities and made available by the Massachusetts Department of Energy Resources shows that a 2007 investment of $120 million in energy efficiency will yield an estimated $673 million in cumulative bill savings for participating customers.
To learn more about how each state is investing RGGI auction proceeds, visit the link below.
The 10 Northeast and Mid-Atlantic states participating in RGGI (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island and Vermont) have designed and implemented the first market-based, mandatory cap-and-trade program in the U.S. to reduce greenhouse gas emissions. Power sector CO2 emissions are capped at 188 million short tons per year through 2014. The cap will then be reduced by 2.5% in each of the four years 2015 through 2018, for a total reduction of 10%.
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