Second RGGI Greenhouse Gas Auction Successfully Completed
Beveridge & Diamond, P.C. - Massachusetts Environmental, Land Use & Real Estate Alert, 2009
Under the Regional Greenhouse Gas Initiative (RGGI), ten northeastern states - including all five New England states - have committed to a regional approach to reducing greenhouse gases (GHGs) through the adoption of cap and trade programs in each state. These programs cap emissions from the largest fossil fuel fired power generation sources at their current levels, and then lower the cap 10 percent by the year 2018.
Implementation of these reductions depends upon the ability of holders of carbon allowances to “trade” those allowances, which requires the development of consistent and transparent markets for the purchase and sale of GHG allowances. Each allowance equals the right to emit one ton of carbon dioxide.
Most of the GHG allowances allocated by the ten participating states are distributed through quarterly auctions, conducted in accordance with state rules but regionalized to provide for a more orderly market. Allowances sold at these auctions are all offered by participating states - while private sales are allowed in accordance with most state rules, the auctions are a vehicle to sell only those allowances offered by the participating states.
The first auction was conducted in September of 2008, and all 12,565,387 of the offered allowances were sold, for a clearing price of $3.07 per allowance. The second auction was conducted in December of 2008, and the results were released in January. All 31,505,898 of the offered allowances were sold, for a clearing price of $3.38 per allowance. The submitted bids sought 3.5 times more allowances than were offered for sale, and the auction raised $106.5 million for use by the ten RGGI states. Most of the states have committed to use part of these proceeds to fund energy efficiency and renewable energy projects.
For more information on the RGGI auction process, please contact Steve Richmond at srichmond@bdlaw.com.
