The country's first cap-and-trade auction for greenhouse gas reduction raised nearly $40 million for Northeastern states to spend on renewable energy technologies and energy-efficiency programs
The country's first cap-and-trade auction for greenhouse gas reduction raised nearly $40 million for Northeastern states to spend on renewable energy technologies and energy-efficiency programs.
All fossil fuel-burning power plants in a 10-state region were required to buy credits to cover the carbon they emit.
In the absence of a federal government program to cap the amount of carbon dioxide that power plants pump out of their smokestacks, 10 Northeastern states established the initiative to set their own limits and force all fossil fuel plants to buy allowances to cover excess emissions. Electric power companies were the biggest spenders according to RGGI.
The Regional Greenhouse Gas Initiative is viewed as a possible model for a national program to reduce emissions of carbon dioxide.
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.
The 10-state RGGI consortium includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.
Six of the states participated in the first of a series of planned quarterly auctions. The next is scheduled for Dec. 17.
The earnings from the auction will go to the six participating states based on the number of allowances they had. Maryland will receive $16.4 million; Massachusetts, $13.3 million; Connecticut, $4.2 million; Maine, $2.7 million; Rhode Island, $1.3 million, and Vermont, $621,000, according to the initiative. The states plan to invest the funds in renewable and energy efficient technologies, as well as programs to benefit utility rate payers.
All 12.5 million allowances were sold to 59 bidders representing a myriad of industries.
Carbon credits have 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 could be resold later to power producers that anticipate exceeding their limit.
At least one environmental group, the Adirondack Council, said it planned to purchase some credits to reduce the overall amount of carbon emissions permitted in the region.
"The first RGGI auction has successfully used market forces to set a price on carbon, and this will send a clear market signal to support the investment in clean energy technologies," said Pete Grannis, commissioner of the New York state Department of Environmental Conservation and RGGI chairman.
RGGI caps the total amount of carbon that power plants in the 10 states can pump out of their smokestacks at 188 million tons, 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.