Energy and Clean Technology Alert: Regional Greenhouse Gas Initiative Announces CO2 Auctions
3/28/2008
On March 17, 2008, the Regional Greenhouse Gas Initiative (RGGI) proposed dates for the first two auctions of carbon dioxide (CO2) allowances under its cap-and-trade program: September 10, 2008 and December 17, 2008. Under the cap-and-trade program, scheduled to launch in 2009, the RGGI states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island, and Vermont) will cap emissions from larger fossil-fuel-fired electric generating units. The cap will decrease in later years to achieve a goal of reducing emissions by 10% below recent annual averages by 2019.
Initially, the RGGI program imposes limits only on generating units above 25 megawatts. Each RGGI state has been allocated a limited number of emissions allowances, each representing one ton of CO2. Some states will distribute a portion (up to 75%) of those allowances directly to the covered units, while others will auction 100% of their allowances. For each ton of its CO2 emissions, each covered unit must obtain an allowance (or an offset credit) from the initial distributions or by trading with other holders of allowances.
The first auction features a single-round, uniform-price, sealed-bid format. Allowances will be available in lots of 1,000 (equivalent to 1,000 tons of CO2). Allowances can be auctioned up to four years in advance of when they will be used for compliance, but allowances will not be sold for less than the reserve price of $1.86. Any allowances that do not receive a bid of at least $1.86 will be returned by the RGGI states for future auctions.
RGGI is the first mandatory CO2 cap-and-trade program in the United States and, in the future, could expand to cover other greenhouse gases. RGGI ultimately may be affected, even enhanced, by a national CO2 cap-and-trade program if pending federal legislation goes forward.
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If you have questions regarding RGGI, voluntary CO2 trading
markets, or proposed federal initiatives, please contact:
Colin G. Van Dyke
(617) 348-1655 | CGVanDyke@mintz.com
Richard A. Kanoff
(617) 348-3070 | RAKanoff@mintz.com
Thomas R. Burton III
(617) 348-3097 | TRBurton@mintz.com
Patrick J. Kealy
(617) 348-1679 | PJKealy@mintz.com
or any of our Energy and Clean Technology attorneys.
We’d be delighted to work with you.
