This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.


US Cap and Trade Growing, May Hit $2 Billion By 2020

America’s first functioning cap-and-trade program recently marked its sixth anniversary with perhaps its strongest auctions yet – but exponentially greater success may be just around the corner.
Power plant emissions

The Regional Greenhouse Gas Initiative (RGGI) held its 19thauction of CO2 allowances late last week, selling nearly 38 million allowances at a clearing price of $2.80 and generating $105.9 million in revenue. 69% of permits were purchased by electricity generators and their corporate affiliates.

That revenue will be earmarked for investment in clean energy technologies like energy efficiency, renewables, and climate change adaptation across RGGI’s nine Northeast US member states.


Auction Results Rising Over Time

Selling 100% of available allowances and generating millions for clean tech are both significant accomplishments, but RGGI’s latest auction looks even better with a little context.

Both the amount and prices of allowance sales rose from RGGI’s 18th auction in December 2012, which saw 19.7 million allowances (53% of available allowances) sold at a clearing price of $1.93 and generated $38.1 million in revenue.

That auction represented a decline from the 17th auction in September 2012, which sold 24.5 million allowances (65% of available allowances) at a clearing price of $1.93 and generated $47.4 million in revenue.

Taking another step back, RGGI’s impact becomes even clearer. A 2012 report found states have invested $617 million of auction revenue from the first 16 quarterly auctions into clean energy technology. In addition, a 2011 report found RGGI state carbon allowance investments kept more than $765 million in local economies by reducing fossil fuel demand. “RGGI has provided a roadmap to a clean energy future,” said Collin O’Mara, Delaware’s Secretary of Natural Resources and Environmental Control.

Tighter Cap, Greater Results

While RGGI’s auction system has worked well, results have been uneven over time, especially as much of the regional generation fleet has transitioned to natural gas. In addition, prices have remained relatively low compared to Europe and California.

Since overall emissions have fallen, power plants are generally not too far above RGGI’s emissions cap, meaning allowance prices (and thus action from utilities to reduce emissions as a result of the cap) have stayed relatively static. However, all that may be about to change – for the better.

Just over a month ago, the RGGI states decided to reduce the 2014 CO2 budget (the “cap” in cap-and-trade) from 165 million to 91 million tons and retire unsold 2012 and 2013 allowances.

This 45% cut is expected to boost allowance prices to $4 per ton in 2013 and up to $10 per ton in 2020, creating billions of new revenue every year. By comparison, RGGI allowance auction clearing prices have never risen higher than $3.51.

All This Without Utility Bill Price Spikes

Critics may be quick to decry the decision as harmful for utility customers, but the new cap reflects actual emissions levels that are currently 40% below RGGI’s initial forecasts. And, utility bills haven’t suffered from reduced emissions – electricity prices have decreased 10% across the region since RGGI’s launch.

The cap will continue to decline over time, dropping an additional 2.5 percent each year from 2015 to 2020, and will flexibly account for allowances already held by market participants, reducing the potential for price spikes.

In fact, an analysis by ICF International forecasts the average electricity bill for residents of RGGI member states will increase less than 1% by 2020, while emissions will decrease 15% from current levels and auctions will generate $2.2 billion in new revenue for clean tech investments.

Comparatively Speaking, The Choice Seems Clear

As RGGI continues to mature, its economic and environmental benefits continue to grow. Member states have enjoyed one of the strongest clean energy economies in the country and have saved hundreds of millions in energy costs.

By comparison, New Jersey, the one member state that has withdrawn from the program, may lose $680 million in revenue and recently slipped in SEIA’s national solar ranking. The benefits of RGGI membership seem pretty clear, and national policymakers should keep the system’s success in mind as a example of how emissions can fall while economies benefit.

Note: the seventh paragraph was updated to accurately reflect state investments in clean energy technologies.

RGGI Nets $106 Million For Clean Energy, May Hit $2 Billion By 2020 was originally published on: CleanTechnica. To read more from CleanTechnica, join over 30,000 others and subscribe to our free RSS feed, follow us on Facebook or Twitter, or just visit our homepage.

Silvio Marcacci's picture

Thank Silvio for the Post!

Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.


Ivor O'Connor's picture
Ivor O'Connor on Mar 20, 2013 1:33 pm GMT

When I see "cap-and-trade" I think "smoke-and-mirrors". I'm all for making fossil fuel and nuclear companies pay for their damage. However this "cap-and-trade" I think works in their favor because it is so complicated nobody but those paid to exploit it really knows what's happening. 

Instead i'd like to see something much more direct. Like fossil fuel and nuclear companies forced to install solar panels and the wiring into the grid along the highways. All that wasted land could be put to use!

Thomas Garven's picture
Thomas Garven on Mar 21, 2013 3:21 pm GMT

I agree Ivor; Cap and Trade is not the solution.  Implementing more renewable energy systems is.  Here is my opinion and I believe many Americans would agree.     

1. Cap and Trade does not create wealth or help the majority of the American people. It in fact robs the people of the funds they need to install more renewable energy systems by increasing the cost of energy at a time when we should be doing exactly the opposite.

2. Cap and Trade is perceived by many Americans as just another tax to help create a bigger government and/or to line the pockets of a select group of individuals or corporations.

3. Cap and Trade programs do not create a significantly larger workforce who pay taxes which can reduce the deficit.  Instead what it does is remove needed capital from the private investment sector which builds and installs the renewable energy systems valued by our President and a majority of the American people and;

4. Cap and Trade is not a product. You can't eat it, the public can't spend or save it, you can't drive it or plant it in the ground and watch it grow.  It is nothing more than the transfer of smoke from one location or industry to another.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »