Published: October 02, 2008 10:20 am            

Nation's first greenhouse gas auction nets $38.5M

ALBANY, N.Y. — The nation's first cap-and-trade greenhouse gas auction raised nearly $40 million that will be spent by Northeast states on renewable and energy efficient technologies.

Under the Regional Greenhouse Gas Initiative, or RGGI, all fossil fuel-burning power plants in a 10-state region are required to buy credits to cover the carbon they emit. The results of the first of a series of quarterly auctions were released Monday.

The initiative is viewed as a possible model for a national program to reduce emissions of carbon dioxide, a gas blamed for global warming.

Energy, financial and environmental interests paid $3.07 per allotted ton of emissions, about 65 percent more than the minimum set price of $1.86. RGGI said most of the bidders were power generators.

The price, along with the strong showing of power generators among the 59 bidders, bode well for the program, said Patricia Aho, a Maine lawyer who represents one of the companies participating in the auction.

"Those are good signs that we have a robust cap-and-trade program," she said.

The 10-state RGGI consortium includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

Six states participated in the first auction. The next is scheduled for Dec. 17.

"This is a strong indication that when New York participates in our first auction in December, it will also be a success," said New York Gov. David Paterson.

The $38.5 million raised in Thursday's auction will be distributed to the six states based on the number of allowances they had in the auction, which had a total of 12.5 million allowances. The states plan to invest the funds in renewable and energy efficient technologies, as well as programs to benefit utility rate payers.

Connecticut will receive $4.2 million; Maine, $2.7 million; Maryland, $16.4 million; Massachusetts, $13.3 million; Rhode Island, $1.3 million; and Vermont, $621,000.

Critics say consumers will end up funding the program. RGGI research suggests a typical New York residential customer would see a monthly bill increase of 78 cents, but New York's Business Council, a lobbying group, says the increase is likely to be greater.

Some, but not all, of the states plan to use some auction proceeds for consumer rebates.

"We will use these funds to help municipalities find greener solutions to their energy challenges, and help consumers reduce their energy bills," Massachusetts Gov. Deval Patrick said. "With a difficult winter ahead, we expect to put these resources to work immediately."

Carbon credits have been traded in commodities markets, but this was the first government-mandated auction in the U.S.

Bidders were required to register in advance and verify funds were dedicated to purchasing credits. Those credits may be resold later to power producers that anticipate exceeding their limit.

At least one environmental group, the Adirondack Council, said wanted to purchase credits to reduce the overall amount of carbon emissions permitted in the region.

RGGI caps the total amount of carbon that power plants in the 10 states can pump out of their smokestacks at 188 million tons annually, which is slightly higher than the current level. The cap will be lowered by 10 percent over the next 10 years

Other regional greenhouse gas coalitions, such as the Western Climate Initiative and the Midwestern Greenhouse Gas Accord, are in the early stages of development.

        

• Click to discuss this story with other readers on our forums.