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RGGI States’ first CO2 auction off to a strong start as the first-in-the-nation auction – a success

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Photo of Skhoweghan Mill in Maine by Ramona du Houx

October/November 2008

by Ramona du Houx

Northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) announced that the auctioning of carbon dioxide (CO2) emissions allowances in North America is off to a strong start. All of the 12,565,387 allowances offered for sale on September 25, 2008, were sold at a clearing price of $3.07 per allowance.

“The 1st auction went very smoothly, giving the RGGI states a good launch of this first-in-the-nation greenhouse gas system. The RGGI system also represents the most ambitious effort to date of states working together to tackle a major environmental issue without federal action — the ten states from Maine to Maryland did this entirely on their own,” said Maine’s commissioner of the Department of the Environment, David Littell.

Even the federal government has officially said the global warming threat is real but has never taken the opportunity to establish a cap-and-trade system. “The ten northeastern RGGI states have moved forward in a bipartisan effort to reduce greenhouse gas emissions, in light of the Bush administration’s failure to do so, despite multiple opportunities,” said the commissioner.

RGGI brought the northeastern states together in this unprecedented effort.

“This auction shows what states working together are accomplishing,” said Governor Baldacci. “This effort required detailed rules and program development through the dedicated work of environmental and energy commissioners from the ten northeastern states.”

The work was a huge undertaking, which was an unprecedented collaboration. “The working relationships we’ve developed will allow us to continue to build on this strong Northeastern and Mid-Atlantic states’ effort to reduce greenhouse gas emissions, encourage renewable and green energy development, and reduce the costs of energy,” said Commissioner Littell.

The RGGI initiative has spawned similar initiatives, including the Western Climate Initiative and the Midwestern Regional Greenhouse Gas initiatives, involving a total of 23 states and a half dozen Canadian provinces in moving forward with tackling the threat of global warming.

“I believe that this issue needs to move forward at the federal level. We recognize the gravity of the threats posed by climate change, and other states are supporting a cap-and-trade system to reduce emissions of greenhouse gases. We must move forward to address global warming, not just in the Northeast, but throughout the United States,” said Baldacci.

RGGI, Inc. reported that 59 participants from the energy, financial, and environmental sectors took part in the first-in-the-nation auction, indicating a strong start in the first of many CO2 allowance auctions. The demand for the allowances appeared to have been very strong, with a total quantity of 51,761,000 allowances demanded, which was four times available supply for this first auction.

The $38,575,783 in proceeds produced from the auction will be distributed to Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont: the six RGGI states that offered allowances for sale during the first auction. The states are investing those funds in energy efficiency and renewable energy technologies and programs to benefit energy consumers.

“The ten RGGI states have demonstrated great leadership in coming together to offer this first carbon cap-and-trade system, and the smooth completion of the initial auction is proof that the RGGI is leading the nation in the battle against climate change,” said Pete Grannis, commissioner of the New York State Department of Environmental Conservation and chair of the Region Greenhouse Gas Initiative, Inc. “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.”

The RGGI auction was administered by World Energy Solutions, Inc., which operates online exchanges for energy and green commodities.

The next allowance auction is set for December 17, 2008. These early auctions, combined with the others being held in the first compliance period, will ensure an ample opportunity for bidders to obtain the allowances they will need for compliance across the entire ten-state region. RGGI intends to hold quarterly auctions during the first RGGI three-year compliance period, which will be from January 1, 2009, to December 31, 2011.

Maine’s Energy and Carbon Savings Trust ordered that $750,000 be made available to help low-income Mainers reduce heating fuel use through conservation efforts this winter. The first auction proceeds of $2.6 million are being disbursed. The trust funds may be used for a variety of energy conservation efforts under Maine’s RGGI statute. The bulk must be dedicated to electricity conservation. A portion may be used to address other energy needs, such as fuel oil conservation and weatherization efforts.

“When we enacted RGGI, our goal was to combat the emissions of greenhouse gases and to fund conservation efforts,” said Governor Baldacci. “High energy prices this winter are a real threat to working families and to our economy. By putting these resources to work, we can help families stay safe and secure in their homes and reduce our dependency on foreign oil.”

About the Regional Greenhouse Gas Initiative—

The ten Northeast and Mid-Atlantic states participating in RGGI have designed the first market-based, mandatory cap-and-trade program in the U.S. to reduce greenhouse gas emissions. The states have committed to cap and then reduce the amount of CO2 that power plants in their region are allowed to emit, limiting the region’s total contribution to atmospheric greenhouse gas levels. Under the RGGI process, the then participating states will stabilize power sector CO2 emissions at the capped level through 2014. The cap will then be reduced by 2.5 percent in each of the four years 2015 through 2018, for a total reduction of ten percent. The ten states participating in RGGI are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island, and Vermont. For more information about RGGI, go to: http://www.rggi.org.

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