By Editors of Power Engineering
Just ahead of the 36th auction for carbon dioxide emission allowances through the Regional Greenhouse Gas Initiative, the Energy Information Administration reported the previous auction in March resulted in the lowest auction prices in three years.
More than 14 million allowances were sold at a clearing price of $3 per short ton of CO2, down 16 percent from the clearing price of $3.55/ton in December and 60 percent lower than the peak of $7.50/ton in December 2015.
The next auction is scheduled for June 7.
RGGI is the nation’s first mandatory cap-and-trade program for greenhouse gas emissions, covering the nine states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. Combined, the region accounts for seven percent of total electric power carbon emissions last year, or 79.2 million tons.
While the original objective of the RGGI was to reduce the carbon emissions of each state’s electricity generation sector by 10 percent from their 2009 allowances by 2018, lower natural gas prices and state renewable portfolio standards have caused regional CO2 emissions to fall faster than expected, and the cap was reduced in 2014 by 45 percent from the 2009 level.
This reduction has caused a surplus of allowances. Though some allowances can be used in future years, the availability of too many banked allowances reduces the need to purchase new credits.
Auction prices spiked in 2015 due to the release of the Clean Power Plan, which caused three times as many bids to be submitted than the total number of RGGI allowances offered. Prices have declined due to lowering demand.
The March 2017 auction generated $43.1 million that can be used for energy efficiency, renewable energy, direct energy bill assistance and greenhouse gas abatement programs.
Recent revisions to the program included an adjustment to the reserve price, which effectively sets a minimum allowance price. For 2017, this reserve price is $2.15 per ton CO2, up from $2.10 per ton CO2 in 2016.