news

September 29, 2008

Greenhouse gas sold in first U.S. cap and trade auction

ALBANY, N.Y. - America's first cap-and-trade greenhouse gas auction has sold the right to pump carbon dioxide into the atmosphere at US$3.07 a ton.

The results of Thursday's sealed bid Regional Greenhouse Gas Initiative auction were released Monday. All 12.5 million allowances were sold and 59 bidders representing energy, financial and environmental interests participated.  The online auction is viewed as a model for a national cap-and-trade program to reduce emissions of carbon dioxide, blamed for global climate change.

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

"It is time really to turn the tide on global warming," said New York Gov. David Paterson, who opened the auction last Thursday by ringing the ceremonial bell at the New York Mercantile Exchange. "And we hope that we've done this today."

The program puts a price on carbon dioxide pollution, giving power plants a financial incentive to cut emissions.  Auction proceeds will go toward energy conservation and renewable energy programs in each of the 10 participating states: New York, Connecticut, Delaware,

Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Rhode Island and Vermont.

The program aims to hold carbon dioxide emissions steady through 2014 and then gradually reduce them; it is widely viewed as a model for future programs nationally and around the globe.

"It's historic," said Lance Pierce, climate program director of the Union of Concerned Scientists. "The carbon markets have arrived in the United States.

And carbon markets, if designed correctly, hold the promise for development of cleaner energy ... and reductions in global warming pollution that benefit  consumers, businesses and the environment, as well."

The Northeast effort, called the Regional Greenhouse Gas Initiative, limits the total amount of carbon that power plants in the 10 states can pump out of  their smokestacks at the current level - 188 million tonnes.

Electric power generators must pay for allowances covering the amount of carbon they emit, and the initiative will provide a market-based auction and trading system in which the generators can buy, sell and trade the emissions allowances.  The initiative covers more than 200 fossil fuel power plants, requiring that the owners of those plants pay for the carbon dioxide they emit.

It will gradually reduce carbon emissions by reducing the emissions limit in a series of steps, until it is 10 per cent below the current level a decade from now. The companies that don't reduce emissions can buy allowances from companies that have, thereby creating a financial incentive to reduce pollution because the more environmentally friendly plants won't have to buy as many credits and because they can sell any they don't need.

Dale Bryk, senior lawyer at the Natural Resources Defence Council, said, "This new energy plan is straightforward, highly cost-effective and creates a clean energy pathway for the rest of the country to follow. It is the shape of things to come."

Carbon dioxide trading already exists in Europe. Some carbon dioxide allowances also are being traded in the United States on a voluntary basis through the Chicago Climate Exchange. But the Northeast effort is the nation's first mandatory effort to limit carbon dioxide.

© 2008 The Canadian Press