The Northeast’s long-time regional cap and trade program again is showing that yes, it is possible to make the economics of carbon reduction work – and boost energy efficiency as well.
The Regional Greenhouse Gas Initiative (RGGI) has now raised $2.26 billion with the completion of its most recent carbon allowance auction last week.
The majority of the money pays for energy efficiency, renewables and other consumer-directed programs in the participating states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.
This is not an experimental program; the auction was RGGI’s twenty-ninth. RGGI began in 2009, as the first program in the U.S. to use a market-based approach to reduce carbon dioxide from power plants.
The program works by setting an overall limit on emissions, but offering allowances that let power plants emit carbon. States sell allowances through auctions and invest the bulk of the proceeds in energy efficiency and renewable energy – which results in less carbon emissions.
In all, 25,374,294 carbon allowances were sold at a clearing price of $6.02 each in the most recent auction. The clearing price is nine percent higher than the previous auction, and 23 percent higher than the clearing price from one year ago, according to the Acadia Center, which tracks the auction results.
The results show that the RGGI market continues to thrive, with clearing prices increasing in seven of the last eight quarterly auctions, Acadia said. The organization sees the rising prices as indicative of confidence in the program’s future.
“The RGGI states’ success in reducing climate pollution from the power sector has paved the way for other states to adopt effective market-based climate programs,” said Daniel Sosland, Acadia Center president. “RGGI stlates have created the blueprint for an effective and economically beneficial pathway to a clean energy future.”
The Environmental Protection Agency recently opened the way for RGGI states to use the cap and trade model for the Clean Power Plan, its new greenhouse gas requirement for power plants.
In particular, the EPA provided final targets in mass-based terms, facilitated the use of multi-state trading programs, and allowed states to treat emissions from new and existing units equally. These steps from EPA will let the RGGI states comply by using their existing model, with a few minor changes, Acadia said.
Other states may follow the RGGI model, as well, if they choose.
Since RGGI’s launch, emissions have declined significantly, Acadia said. The states have increased investments in energy efficiency and swapped out coal-fired generation for renewables and natural gas, electricity prices, which are down two percent on average across the region since RGGI took effect in 2009.
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