Tuesday, December 9, 2008

RGGI Hopes To Become National Cap-and-Trade Model

The Regional Greenhouse Gas Initiative (RGGI) will hold its second CO2 allowance auction on Dec. 17. Earlier this year, RGGI became the first mandatory, market-based CO2 emissions reduction program in the United States.

RGGI was designed to be a cooperative effort of ten northeast and mid-Atlantic states, including: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont. It capped emissions for 233 plants by putting a price on the carbon dioxide they emit.

How The RGGI Cap-and-Trade System Works

• Establishing a multi-state CO2 emissions budget (cap) that will decrease gradually until it is 10 percent lower than at the start
• Requiring electric power generators to hold allowances covering their emissions of CO2
• Providing a market-based emissions auction and trading system where electric power generators can buy, sell and trade CO2 emissions allowances
• Using the proceeds of allowance auctions to support low-carbon-intensity solutions, including energy efficiency and clean renewable energy, such as solar and wind power
• Employing offsets (greenhouse gas emissions reduction or sequestration projects at sources beyond the electricity sector) to help companies meet their compliance obligations

The market opened in September as part of a $1.1 billion pilot project. RGGI hoped the success of the program may serve as a nationwide model to stem global warming. While it is clear President-Elect Barrack Obama has committed to a national cap-and-trade system, it remains unclear whether such a national system would model RGGI or incorporate other state efforts, such as AB-32 in California.

In the first auction, a total of 44 entities won allowances and the bid prices
ranged from $1.86 (the minimum bid allowed) to $12.00. A post settlement of the first auction is available here.

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