Regional Greenhouse Gas Initiative Announces Results of First Allowance Auction
Member states and administrators of the Regional Greenhouse Gas Initiative (RGGI) have confirmed that the first allowance auction, held on September 25, 2008, took place in a fair, competitive, and transparent manner. The auction distributed the first set of allowances for the RGGI cap-and-trade program, which goes into effect on January 1, 2009. A total of 12,565,387 allowances from Connecticut, Maine, Maryland, Massachusetts, Rhode Island, and Vermont were offered for bid to parties including entities with compliance obligations, allowance brokers, investors, and environmental groups. Each allowance allows the emission of one short ton of carbon dioxide emissions. Fifty-nine separate entities submitted bids for a total of 51,761,000 allowances. At $3.07, the clearing price was 61% higher than the “reserve” (minimum) price of $1.86, and generated $38,585,783 in proceeds. States will use these funds for energy efficiency programs, to mitigate price impacts of the program on consumers, to stimulate investment in the renewable energy sector, and to cover the administrative costs of the program.
An independent firm, Potomac Economics, monitored the web-based auction and determined that the software functioned without any glitches. Furthermore, they indicated that the high level of participation and demand generated a competitive allowance clearing price. Though specific information about bidders will not be released in order to maintain a competitive environment for future auctions, Potomac Economics has confirmed that most allowances were purchased by entities with RGGI compliance obligations. Because of the auction’s success and because RGGI is the first mandatory, market-based effort to reduce greenhouse gases in the United States, the RGGI auction design is expected to provide lessons for other regional programs as well as a federal cap-and-trade program.
The next RGGI auction will be on December 17, 2008.
Regional Greenhouse Gas Initiative Conducts First Allowance Auction
Pew Center RGGI Page
RGGI Press Release on Auction Results
RGGI Homepage