At a bell-ringing ceremony held at the New York Mercantile Exchange, the Regional Greenhouse Gas Initiative (RGGI) marked the opening of the first-in-the-nation auction for carbon dioxide (CO2) emission allowances.
The RGGI auction held offered 12,565,387 allowances, including CO2 allowances issued by Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont. The CO2 allowances purchased at this auction can be used by a regulated facility for compliance in any of the RGGI states, even if that state did not offer allowances in this auction.
Other RGGI participating states will offer allowances for sale in future auctions as they complete their necessary rulemaking proceedings. A second auction is scheduled for December, with all RGGI participating states expected to offer allowances for sale in the first 2009 auction.
Future sales of CO2 allowances are planned through a steady offering of allowances in quarterly auctions. States have committed to offer for sale before the end of 2011 all of the allowances they are putting into the auctions for the first three-year compliance period. Regulated power companies must hold enough allowances to match their CO2 emissions for the first compliance period by March 1, 2012.
RGGI plans to reduce CO2 emissions through a mandatory, market-based cap-and-trade program. Under RGGI, the 10 participating states will stabilize power sector carbon emissions at their capped level, and then reduce the cap by 10% at a rate of 2.5% each year between 2015 and 2018. All participating states plan to have implementing regulations in place by Jan. 1, 2009.
CO2 allowances under RGGI will be distributed primarily via auctions rather than the free allocation methodology used in other emissions markets. By using an auction, participating states are able to provide benefits to consumers.
Revenues from the carbon allowance auctions will be invested by the participating states in energy efficiency programs, renewable energy stimulus efforts and other programs to benefit consumers. As a result, RGGI will deliver economic and environmental benefits and improve energy security through reduced use of fossil fuels.
SOURCE: Regional Greenhouse Gas Initiative