NEW ENGLAND REGION EMISSIONS TRADING MOVES AHEAD

It looks like the Regional Greenhouse Gas Initiative (RGGI) emissions cap-and-trade system may the first market-based climate change effort in the U.S.

It will begin with auctions of credits to utilities in the participating 10 states based on principles established by Auction Design for Selling CO2 Emission Allowances. The auction will take place in 2009.

RGGI will set emissions caps at 2009 levels and hold them there for 6 years, then ratchet down to a 10% reduction from 2009 levels by 2019. Modest goals, true, but pushing the envelope by current U.S. standards. The Warner-Lieberman Climate Change Act just considered by the Senate would have cut emissions 66% below 2005 levels by 2050. It was more ambitious but it was rejected. It will be back next year, but not before RGGI begins charting the U.S. course.

As participants in the European Union (EU) Emissions Trading Scheme (ETS) have discovered, the success of the allowances auction has a lot to do with the success of the system. A perfect Walrasian auction will balance supply and demand, setting the price of emissions high enough to incentivize utilities and other players to cut emissions but not so high that increased power costs disincentivize economic activity. A perfect Walrasian auction is not easy to achieve.

A national cap-and-trade system incorporating a much wider range of businesses and energy consumers would surely over time be more effective at broader emissions reductions. But there is currently a dearth of courageous national legislators with the leverage to put the U.S. on track to real participation in the mitigation of global climate change. RGGI-initiator George Pataki, former Governor of New York, and the governors who signed on with him deserve recognition and respect.

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New York considers joining carbon-trading compact
Jennifer Smith, June 6, 2008 (Newsday)

WHO
The Regional Greenhouse Gas Initiative (RGGI) 10 participating states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont; Observers: District of Columbia, Pennsylvania, the Eastern Canadian Provinces, and New Brunswick; George Pataki, former New York governor and initiator of RGGI

WHAT
As the Regional Greenhouse Gas Initiative (RGGI) nears its first auction of emissions credits, New York is holding hearings to prepare its citizens.

Studies suggest that as the price of emissions allowances is properly ratcheted up for utility companies...(click to enlarge)

WHEN
The RGGI will cap emissions at 2009 levels through 2015. It will then ratchet the caps down to get to a 10% reduction from 2009 levels by 2019.

WHERE
The RGGI requires the region’s utilities to cap their emissions. Broader cap-and-trade systems have found it more effective to apply caps to a much wider spectrum of businesses and manufacturers.

WHY
- Revenues paid by utilities for the auctioned credits will be used to build New Energy and implement energy efficiencies.
- Many contend participating utilities will pass costs along to ratepayers.
- Regional utilities such as the Long Island Power Authority and National Grid both back the plan and are hoping to keep cost increases under control increased efficiency measures.
- Early impacts have already begun to emerge: Utilities are studying the shifting oil and coal use to natural gas, which generates fewer emissions. They are also investigating ways to make older power plants more efficient.

...energy prices for consumers level out or fall. (click to enlarge)

QUOTES
- Peter Iwanowicz, office of climate change director, New York Department of Environmental Conservation (DEC): "The first auctions will be held this fall…It's really important we hear from the general public at this hearing about their thoughts and concerns -- or their opposition -- so that we can finalize our regulations this summer."
- Kevin Law, chief, Long Island Power Authority (LIPA): "We're going to work with the state to make sure that LIPA gets its fair share of funds to help offset the cost of our renewable energy programs…"
- Pete Grannis, Commissioner, DEC: "…having the debate now is critically important. It's the beginning of a whole climate change agenda for the next administration."