In this Emerging Issues Commentary, Dustin Till of the Marten Law Group explains how the Northeastern states Regional Greenhouse Gas Initiative’s (RGGI) first auction of carbon dioxide (CO2) allowances proceeded. Discussion includes who may participate in the auction, the bidding procedures and pricing of the allowances. This auction and those that follow, are the first glimpse at what carbon prices might be in the United States under a mandatory cap-and-trade program.

The auction was the first government-administered auction of greenhouse gas emission permits in the United States. Six of the 10 states participating in the RGGI cap-and-trade program auctioned a total of 12.5 million allowances (i.e., 12.5 million tons) of CO2 in 1,000-ton lots.

“RGGI is auctioning carbon dioxide allowances in order to comply with RGGI’s innovative CO2 emission reduction program, which requires power plants operating in the 10-state region to achieve CO2 emission reductions of 10% below 2005 levels by 2020,” Mr. Till writes.  “The emission reduction goals of the RGGI cap-and-trade program are to hold regional emissions steady at the current level of 188 million tons of CO2 per year over the period 2009-2012, then achieve reductions of 2.5% per year over the period 2014-2018. Allowances may be banked for future use. . . .

“The September auction will be the first major trial for participating states and Regional Greenhouse Gas Initiative, Inc., the non-profit organization set up by RGGI states to provide administrative and technical support. Auction participants were required to submit a Qualification Application and Intent to Bid form to RGGI, Inc. by August 8, 2008. Applicants were also required to register for an account in the online registry, RGGI CO2 Allowance Tracking System (COATS), by August 8. . . .

“Climate change policymakers and participants in the Western Climate Initiative (WCI), which is developing a cap-and-trade program for a number of Western states, Canadian provinces, and Mexican states, will closely follow RGGI’s initial operational experiences and auction results,” Mr. Till says.

Subscribers to www.Lexis.com may read much more about this topic by purchasing Mr. Till’s entire expert commentary at Marten Law Group: Cap and Trade--Nations First Carbon Auction Is Underway for RGGI.