2008/09/03 ENE Releases Report on RGGI Emission Trends and Inaugural Auction Press

For Immediate Release 
September 3, 2008 
 
Contact: 
Jeremy Marin, (617) 947-2409
Derek Murrow, (203) 285-1946 or (802) 238-3680 (cell)

ENE Releases Report in Advance of RGGI Inaugural Auction
 
Shines a spotlight on trends and potential price volatility
 

ROCKPORT, ME -  ENE (Environment Northeast), a research and policy organization and stakeholder in the Regional Greenhouse Gas Initiative (RGGI), released a report on regional emissions trends and supply-demand characteristics related to the inaugural RGGI allowance auction.  The report is intended to inform market participants in advance of the September 25, 2008 auction and to facilitate the launch of RGGI by providing all interested parties with up-to-date information.
 
"This first-of-its-kind carbon dioxide allowances auction is a watershed moment and ENE is committed to ensuring that market participants have good information and the launch of RGGI is a success," said Daniel L. Sosland, executive director of ENE.
 
Derek Murrow, ENE's director of policy analysis commented, "On a very positive note, we've seen a decline in emissions from RGGI power plants - this will likely lead to a soft start of the first U.S. greenhouse gas program with a hard cap. We hope this report helps participants and interested parties to understand the fundamentals of this new market to reduce early price volatility."

Summary of Key Findings:

• Emissions from facilities regulated under RGGI have declined significantly since the program was negotiated in 2005 - a favorable trend - and remain well below the level of the regional RGGI cap. The decline in emissions should moderate demand for allowances and keep prices down in the near-term if the trend continues.
• Although emissions have declined, there is significant potential for this trend to reverse should there be a change in underlying emissions and energy consumption drivers - such as energy prices, weather, economic trends, and availability of non-emitting generation.
• Despite low emissions, demand for allowances in the inaugural auction on September 25, 2008 may still be strong.  Four states (Delaware, New Hampshire, New Jersey and New York) were unable to finalize regulations in time to contribute allowances to the first auction. These four states cumulatively account for 55% of the cap. If market participants do not factor this supply-demand imbalance and the three year compliance period into their bids, prices could be artificially high in the September auction. 
• Any new commodity market goes through an initial, and sometimes volatile, period of "price discovery" as market participants learn the system and underlying fundamentals.  There is every reason to anticipate that RGGI allowance prices may be unsettled and experience some price volatility through the first rounds of auctions. 

The September 25, 2008 allowance auction will initiate RGGI as the first binding system in the United States to cap and reduce greenhouse gas emissions over time.  Under RGGI, utilities with over 25 megawatts (MW) of fossil fuel-based generating capacity must purchase emissions allowances (permits to pollute) for every ton of greenhouse gas emitted.  Utilities able to reduce emissions below their respective allowance totals may sell surplus allowances to utilities that are unable to meet emission reduction targets.  RGGI thus harnesses the market's capacity to search out cheap emissions reductions and rewards climate-friendly innovation in the electric power sector.

ENE has been a stakeholder in negotiations concerning RGGI since they began in 2001. ENE took a leadership role among the 24 energy, business and environmental stakeholders selected for the RGGI process by preparing proposals, developing data and key information, and informing the stakeholder group about policy options and approaches to consider.
 

Download: Emissions Trends and the Inaugural Allowance Auction

Additional ENE background documents on RGGI

RGGI official Web site: www.rggi.org