Auction of greenhouse gas 'credits' raises ante
The right to emit greenhouse gases in the Northeast is a little more valuable than expected.
That, at least, is one way to read the results of the nation’s first-ever auction of carbon allowances, each of which allows utilities in 10 Northeast states to emit 1 ton of carbon into the air.
All 12.5 million of these allowances sold in the sealed-bid auction at $3.07 apiece.
This price is half as much as was assumed in a UNH study last year and well above the minimum price set by the Regional Greenhouse Gas Initiative.
“There was, perhaps, more interest than some had anticipated,” said Martin Murray, spokesman for Public Service of New Hampshire. The state’s largest utility won’t say whether it was one of the 59 bidders, and no list of participants has been given out by the RGGI.
The state government did not participate because it’s still ironing out its rules. The state plans to sell 1.2 million allotments in the next quarterly auction, in December.
Robert Scott, director of the New Hampshire Department of Environmental Services, went down to Virginia to watch the electronic auction.
The mere fact that it proceeded smoothly was the best news from last Thursday’s sale – the results of which were not released until Monday after they were tallied and confirmed by observers.
This was the first government-mandated sale of carbon credits ever to take place in North America. Europe has had a similar “cap and trade” system in effect for several years, but its allotments were handed out by governments, not sold by auction.
“We thought it went very well,” said Joanne Morin, climate and energy programs manager for the state Department of Environmental Services. “It was very smooth.”
The sale was watched around the world.
“This auction was a resounding success and provides evidence to state and federal leaders that auctioning is the way to go. Auctions like this one let the market put a price on pollution and generate funds to help consumers and businesses build a clean energy economy,” said Ned Raynolds, Northeast climate policy coordinator for the Union of Concerned Scientists.
RGGI, which covers states from Maryland to Maine, said most of the allotments were purchased by utilities, which need them to run their power plants. PSNH, for example, emits between 4 million and 5 million tons of carbon each year.
But some were purchased by environmental groups, who want to boost the price to give utilities an incentive to cut pollution, and groups who bought them for financial speculation, hoping that they will rise in price later.
The fact that the price is somewhat higher than expected is good news and bad news for New Hampshire.
The good news is that the state will get more money for energy-efficiency programs, which are partly funded by proceeds from the RGGI program.
It’s far from clear what will happen to the price as time goes on, but if this price holds over the next year, New Hampshire would get around $18 million for energy efficiency programs. That would roughly double the amount spent on the programs by the state’s utilities.
The $38 million collected from Thursday’s auction will be distributed to Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont, the six RGGI states that offered allowances. New York, New Jersey and Delaware are slated to join New Hampshire at the December auction.
The bad news is that the higher price also means that state ratepayers are likely to be hit with more of a price hike following Jan. 1, after PSNH and other state utilities calculate their energy charge, which changes in the cost of producing electricity.
RGGI does not cover other pollution sources, like vehicles and industry.