Bloomberg on RGGI Auction Announcement, 3.17.08 Press

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVCVqj22OKFs

Northeast States Will Hold First U.S. Carbon Auction (Update1) 

By Jim Efstathiou Jr.

March 17 (Bloomberg) -- A coalition of northeastern states will hold the first U.S. sale of greenhouse-gas emissions permits Sept. 10 under a program to cap pollution blamed for global warming, according to a statement from the group.

The Regional Greenhouse Gas Initiative, an emissions- limiting agreement among 10 states including New York, aims to reduce carbon-dioxide emissions 10 percent by 2019. The program will regulate fossil-fuel-burning electricity power plants that can generate 25 megawatts or more.

Under the cap-and-trade initiative, utilities may buy emissions permits and apply them toward their pollution caps. Carbon dioxide, the main pollutant blamed for rising sea levels, heat waves and more intense storms, is produced primarily from burning fossil fuels.

``Climate change is the most significant environmental problem of our generation,'' Pete Grannis, chairman of RGGI and commissioner of the New York State Department of Environmental Conservation, said in a statement. ``Absent federal leadership, the Northeast and Mid-Atlantic states of RGGI are taking action to cut greenhouse-gas emissions and reduce their impact on the environment.''

Utilities will bid in an open auction on emissions permits that can be used to meet their pollution targets. The group will hold quarterly permit sales, RGGI said in a statement today.

188 Million Tons

Permits for about 188 million tons of carbon dioxide will be available at the start. The number of permits declines from 2015 though 2019 to bring emissions down 10 percent.

Carbon emissions in the region for 2006 and 2007 may have been 10 percent below the 188 million-ton cap, said Derek Morrow, director of policy analysis for Environment Northeast, a nonprofit consulting firm. RGGI planners agreed to set a reserve price of $1.86 for every ton of carbon to prevent permit prices from falling close to zero, Murrow said.

``It's unlikely that it would be significantly higher than'' $1.86 a ton, Murrow said in an interview. ``There is a lot of uncertainty in terms of the price.''

High energy prices, the availability of non-polluting nuclear power and weather conditions led to lower carbon emissions from 2005 to 2006, Murrow said. Hotter than normal summers or colder than normal winters in the future will push permit prices higher, he said.

EU Permits Fall

European Union emissions permits for December slid 67 cents or 3 percent, to 21.54 euros ($33.99) a metric ton on the European Climate Exchange in London at 12:33 p.m. local time.

RGGI emissions permits can be bought and banked for future use when pollution limits are lowered. The auction will be open to all bidders including commodity traders.

``Only time will tell what the allowances will trade for,'' Murrow said. ``Allowances sold in earlier years can be banked, so people will know there may be more scarcity in terms of the availability of allowances over time, so there may be more demand early on.''

The program includes Maine, Massachusetts, Vermont, New Hampshire, Connecticut, New Jersey, New York, Maryland, Delaware and Rhode Island.

To contact the reporter on this story: Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net

Last Updated: March 17, 2008 13:45 EDT