By Lisa Cohn
August 21, 2008
Several eastern states will see a large injection of cash for energy efficiency after the nation’s first mandatory auction of carbon dioxide allowances September 25.
The auction marks the United States entry into the world of capping and trading carbon dioxide emissions. Ten states are participating in the program, known as the Regional Greenhouse Gas Initiative (RGGI), or more commonly called “Reggie.”
To comply with RGGI, power generators must purchase carbon allowances, or permits. The September auction marks the first open sale of the allowances.
Why is this good for energy efficiency? Because the states will earn significant revenue from the sale of allowances, and many plan to put the money into efficiency programs.
By some estimates the first auction could earn the states as much as $63 million. That is with only six states participating: Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont. The other four states, Delaware, New Hampshire, New Jersey and New York did not have time to finalize their auction rules. However, those states have an opportunity to participate in a second auction in December.
How does it all work? Together, the states must cap carbon dioxide emissions at 188 million tons/year from 2009 to 2014. The cap drops by 2.5% for each of the next four years.
Power plants must secure one allowance for each ton of carbon dioxide they emit. The September 25 auction will offer 12,565,387 allowances.
State policymakers spent a lot of time hashing over RGGI details, and they came up with a program that makes a lot of sense. By spending auction revenue on efficiency, the states reduce power use, which further cuts back on carbon dioxide emissions.
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