First RGGI Auction Is A Crucial Proof Of Concept

Published: 17 October 2008

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8 pages, 5 figures

Executive Summary

The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade scheme covering the emissions from approximately 230 electricity generating units of 25 MW capacity or more in ten north-eastern US states. On September 25, 2008 RGGI successfully completed its first auction of CO?allowances in preparation for the start of the first compliance period in January 2009. The auction raised $39 million, for state administrations to invest in carbon reduction programs, based on a clearing price of $3.07. RGGI is a crucial proof of concept for a federal cap-and-trade scheme. North-eastern power generators like Dynegy and Dominion now lobby for a national scheme.

How You Benefit

This assessment of the Regional Greenhouse Gas Initiative following its first auction helps individuals responsible for climate change in utilities, heavy emitters and service providers to understand what the significance of RGGI will be under a new US administration. The charts illustrate the volume of historical emissions since 2002 and the proposed cap from 2009 to 2018. The analysis covers key points such as sealed bid single clearing price auction design, the impact of auctioning versus free allocation, and the link between CO2 allowance prices and the emissions cap.

REGIONAL GREENHOUSE GAS INITIATIVE LAUNCHES FIRST AUCTION

Mandatory Cap-And-Trade Regime With Allowance Auctions
Goal Of Emissions Stabilization By 2015
Safety Valve To Minimize Carbon Impacts
Significant Level Of Auctioning Versus Free Allocation
Project Offsets To Meet Compliance

RGGI’s First Allowance Auctions Sets A Low Price For Carbon

Sealed Bid Format
Auction Rules To Manage Risk
Successful Execution
Revenue Raised For Consumer Programs

RGGI Is A Crucial Proof-Of-Concept For A Federal Cap-And-Trade Scheme

Auction Success Built On Years Of Planning And Preparation
Six States Jumped Straight To 100% Auctioning
RGGI Can Extend Into Additional States And Sectors
Electricity Generators Now Own The Problem
Carbon Prices Start Low And Move Upwards
The Scheme Links With The CDM Market

RGGI Is A Successful Political Initiative With Limited Economic Impact

Will Win Plaudits From The New US President
The Only Mandatory CO2 Cap-And-Trade Scheme In The US
Proves A Political Point And Avoids Economic Problems

TABLE OF FIGURES

Figure 1. RGGI Facts And Figures
Figure 2. RGGI Annual CO2 Emisssions Cap 2009-18 (short tons)
Figure 3. The Highest Rejected Bid Sets The Auction Clearing Price
Figure 4. RGGI Expects Project Offsets Will Account For 50% Of Reductions
Figure 5. RGGI Cap In First Compliance Phase Is Above Forecast Emissions