No sign of life in RGGI Auctions
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(NEW YORK, NY) For the ninth consecutive time, the price for carbon allowances under the Regional Greenhouse Gas Initiative failed to rise above the floor price. The 17th Quarterly Auction held by the nine-state emissions compact generated nearly $47.5 million, but over a third of the allowances went unsold as demand has remained weak for well over two years.
Fossil fuel power plants in the nine remaining states will need to secure allowances for every ton of CO2 they emit over the next three years. The slow economy has reduced demand for electricity in the Northeast, and power producers have replaced carbon-dense coal with natural gas, which released less CO2 per kilowatt. The result of these pressures is a large drop in carbon emissions unrelated to the four year old greenhouse gas cap and trade program.
This dip in demand has also caused the secondary market for RGGI allowances to collapse. Last week’s 17th Auction was the first time that no one besides the power producers themselves purchased any RGGI allowances. Overall, 88% of the allowances sold have gone directly to power plants, leaving little if any available on the secondary market.
Last week, RGGI offered nearly 38 million allowances, but sold just 24.5 million. The clearing price of $1.93 per ton was set as a minimum by RGGI. The clearing price has not risen above this mandated floor since June of 2010.
New Hampshire’s share of last week’s auction amounted to just over a million allowances, generating $2 million. Auction proceeds will be put in the Greenhouse Gas Emissions Reduction Fund, which the Public Utilities Commission uses to make grants for energy efficiency and sustainable energy projects. Since signing onto RGGI in 2008, New Hampshire has received almost $40.8 million from the program. Under New Hampshire law, power companies may pass on the cost of complying with RGGI to their electric customers.
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