Member states of the Regional Greenhouse Gas Initiative (RGGI) today announced the results of the 29th quarterly auction of carbon dioxide (CO2) allowances. 25,374,294 CO2 allowances were sold at a clearing price of $6.02, which includes all 10,000,000 available allowances from the Cost Containment Reserve. This clearing price is 9% higher than the previous auction, and 23% higher than the clearing price from one year ago. The RGGI states have now raised $2.26 billion for reinvestment, the majority of which is used to fund energy efficiency and other consumer benefit programs. RGGI has been a successful model for reducing power sector emissions, and with reforms to ensure future environmental performance, it will be an effective means of complying with EPA’s Clean Power Plan.
The results of this latest auction show that the RGGI market continues to thrive, with clearing prices increasing in seven of the last eight quarterly auctions. These rising prices are indicative of confidence in the program’s future. RGGI’s first-in-nation model for reducing CO2 from the power sector has outperformed expectations, both in terms of environmental and economic results. As states explore their options for compliance with EPA’s Clean Power Plan, RGGI’s flexible, market-based approach to regulating power plants has gained increasing attention.
“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 Acadia Center President, Daniel Sosland. “RGGI states have created the blueprint for an effective and economically beneficial pathway to a clean energy future.”
In crafting the final version of the Clean Power Plan, EPA took measures to support the use of programs like RGGI. 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. In sum, these steps from EPA will let the RGGI states comply by using their existing model, with a few minor changes.
One of these changes will be a revision to the Cost Containment Reserve.
“The purchase of ten million Cost Containment Reserve allowances in Auction 29 demonstrates the need for reform of this price control mechanism” said Jordan Stutt, Policy Analyst with Acadia Center. As currently structured, additional allowances from the Cost Containment Reserve become available for purchase when price thresholds are met. “These additional allowances have now been made available in both years of the Cost Containment Reserve’s existence. Allowances purchased from the Cost Containment Reserve inflate the RGGI cap, undermining the program’s environmental performance and complicating the process of demonstrating compliance with the Clean Power Plan and state GHG reduction requirements.”
Since RGGI’s launch, emissions have declined significantly as electric generation from natural gas and renewables has displaced carbon-intensive generation from coal and oil, and as investments in energy efficiency have reduced demand for power. Declining emissions have been accompanied by a drop in electricity prices, which are down 2% on average across the region since RGGI took effect in 2009.
“RGGI has demonstrated that smart policy can drive emissions reductions in the power sector while generating consumer benefits,” said Peter Shattuck, Director of Acadia Center’s Clean Energy Initiative. “The continued increase in RGGI allowance prices will help to accelerate the transition to a cleaner power sector.”
Additional information on RGGI’s performance to date, and role in EPA’s regulatory process are described in Acadia Center’s July, 2015 report: RGGI: A Model Program for the Power Sector
The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions. Nine Northeastern and Mid-Atlantic states reduce CO2 emissions by setting an overall limit on emissions “allowances” which permit power plants to dispose of CO2 in the atmosphere. States sell allowances through auctions and invest proceeds in consumer benefit programs: energy efficiency, renewable energy, and other programs.
The official RGGI web site is: www.rggi.org
Jordan Stutt, Policy Analyst firstname.lastname@example.org, (617) 742-0054 x105
Kiernan Dunlop, Communications Associate email@example.com, (617) 742- 0054 x107
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