Carbon goes on the auction block
Sep 25, 2008 - Karen Matthews - The
Greenhouse gases went on sale Thursday
as 10 Northeastern and mid-Atlantic states held the
nation's first auction of pollution credits aimed
at curbing global warming.
"It is time really to turn the tide
on global warming," said New York Gov. David Paterson,
who opened the auction by ringing the ceremonial bell
at the New York Mercantile Exchange. "And we hope
that we've done this today."
The program puts a price on carbon dioxide
pollution, giving power plants a financial incentive
to cut emissions.
Auction proceeds will go toward energy
conservation and renewable energy programs in each
of the 10 participating states: New York, Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire,
New Jersey, Rhode Island and Vermont.
The program aims to hold carbon dioxide
emissions steady through 2014 and then gradually reduce
them; it is widely viewed as a model for future programs
nationally and around the globe.
"It's historic," said Lance Pierce,
climate program director of the Union of Concerned
Scientists. "The carbon markets have arrived in the
United States. And carbon markets, if designed correctly,
hold the promise for development of cleaner energy
... and reductions in global warming pollution that
benefit consumers, businesses and the environment
The Northeast regional effort caps the
total amount of carbon that power plants in the 10
states can pump out of their smokestacks at the current
level - 188 million tons. Electric power generators
must pay for allowances covering the amount of carbon
they emit and RGGI will provide a market-based auction
and trading system where the generators can buy, sell
and trade the emissions allowances.
The Regional Greenhouse Gas Initiative,
or RGGI, covers more than 200 fossil fuel power plants,
requiring that the owners of those plants pay for
the carbon dioxide they emit into the air.
The initiative will gradually reduce
carbon emissions by reducing the cap in a series of
steps, until it is 10 percent below the current level
a decade from now. The companies that don't reduce
emissions can buy allowances from companies that have,
thereby creating a financial incentive to reduce pollution
because the more environmentally friendly plants won't
have to buy as many credits and because they can sell
any they don't need.
Dale Bryk, senior attorney at the Natural
Resources Defense Council, said, "This new energy
plan is straightforward, highly cost-effective and
creates a clean energy pathway for the rest of the
country to follow. It is the shape of things to come."
Carbon dioxide trading already exists
in Europe. Some carbon dioxide allowances also are
being traded in the United States on a voluntary basis
through the Chicago Climate Exchange. But RGGI is
the nation's first mandatory capping effort for carbon
The initiative took five years to bear
fruit. Then-New York Gov. George Pataki brought together
nine other governors five years ago to develop a regional
strategy to limit carbon dioxide emissions from power
Other regional greenhouse gas coalitions,
such as the Western Climate Initiative and the Midwestern
Greenhouse Gas Accord, are in earlier stages of development.
New Jersey Gov. Jon Corzine, who joined
Paterson at a news conference at the mercantile exchange,
noted that both John McCain and Barack Obama support
cap-and-trade programs to reduce greenhouse gas emissions.
Corzine said "there is building momentum" to enact
federal cap-and-trade legislation.
In response to critics who have argued
that the cap is too high, Corzine said, "I think we
need to make sure that the mechanics of the auction
process and the system work." He said the cap would
be lowered at subsequent auctions.
Thursday's auction was run by World
Energy, an operator of online green exchanges. Results
will be released Monday, pending review by an independent