Solid start for Reggie
The Regional Greenhouse Gas Initiative – a statutory cap-and-trade programme covering power stations in 10 north-eastern US states – published the results of its first auction today (a few forward trades have been happening over the summer).
The clearing price was $3.07 – well above the $1.86 floor – suggesting that participants feel the scheme will cut emissions in 2009 (the year the credits will be used in). Environmentalists are quick to point out that RGGI actually allows a 5% increase in emissions from 2008 and credits have come out at $3 because the allowed increase is likely to be smaller than the desired (or baseline) increase.
RGGI is great. It’s the first statutory cap on GHGs in the US. At this stage it is miniscule (Thursday’s auction revenue was about $39m – compare the current value of phase 2 EUAs allocated in 2008: EUR 52bn) and it has to ramp up quickly to be a meaningful part of climate policy. Getting the infrastructure in place is important – but with a non-trade exposed industry like power generation there is every reason for stringent 2010 cap.
(At $3 at least we don’t have to worry too much about the offsets that will be allowed into RGGI…)