Cap And Trade

Published on March 20th, 2015 | by Silvio Marcacci

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RGGI Auction Extends US Carbon Market Winning Streak

March 20th, 2015 by  

North America’s longest-running carbon market just set a new mark for carbon pricing across the Northeast US, passing a significant revenue milestone years ahead of schedule, and continuing an impressive winning streak for American and Canadian carbon auctions.

The Regional Greenhouse Gas Initiative (RGGI) recently held its first 2015 quarterly carbon auction, selling out of all 15.2 million available carbon dioxide allowances at a clearing price of $5.41 per ton of CO2 emitted and generating over $82 million for clean energy and consumer benefits.

RGGI territory

Nimble Carbon Market Design Prevents Oversupply

Last week’s auction was the 27th in RGGI’s history, and it set a new mark for the amount polluters pay for the right to emit a ton of greenhouse gases. The $5.41 allowance price was 20 cents more than the previous high of $5.21, set in December 2014, and marked the ninth consecutive auction to sell out of all available allowances. RGGI also passed a milestone — $2 billion in cumulative proceeds.

RGGI 27th carbon auction results

RGGI 27th carbon auction results chart via Regional Greenhouse Gas Initiative

While the total auction proceeds were the lowest since late 2012, this is a result of fewer allowances being offered amid declining emissions across the system. RGGI reduced the regional CO2 budget (the “cap” in cap-and-trade) in 2014 to recognize declining power sector emissions and prevent an allowance oversupply by reducing the cap 2.5% every year from 2015 to 2020.

RGGI’s nimble design has helped it avoid the European Union’s Emissions Trading System‘s nagging allowance oversupply in recent years, and is similar in design to the California–Quebec linked carbon markets, which declines 3% annually.

Keep pricing context in mind here — it’s important considering RGGI’s allocation prices and revenue are significantly lower compared to those in California–Quebec. RGGI only covers power plant emissions across a combined population of roughly 42 million people, while California–Quebec covers power plant and transportation emissions across nearly 47 million people. RGGI’s prices have also steadily risen since it tightened the cap, whereas California (and Quebec, once they linked) started out with a reduction mechanism in place.

Pricing context is also important when it comes to placing an accurate dollar figure on the damages carbon emissions cost society. Neither RGGI’s $5.21/ton nor California-Quebec’s $12.10/ton price approach the US federal government’s $37/ton social cost of carbon estimate or Stanford University’s staggering $220/ton social cost of carbon, both of which estimate the value to society of reducing carbon emissions.

RGGI Reaches $2 Billion Milestone Five Years Early

Still, RGGI allowance prices are rising steadily, cutting emissions while funding new clean energy projects and reaching revenue projections years ahead of schedule. In 2013 an independent analysis projected RGGI wouldn’t pass $2 billion in cumulative revenue until 2020, but every single member state has pulled in millions of dedicated funding for renewables, energy efficiency, emissions reductions, and consumer utility bill relief.

RGGI member state revenue

RGGI member state revenue chart via Regional Greenhouse Gas Initiative

Given its well-functioning system, dedicated revenue may be the most contentious aspect of RGGI. New York’s governor and state senate have urged significant portions of its revenue be diverted to farmland conservation and habitat restoration, while New Hampshire’s legislature has urged more funding go to consumer bills instead of clean energy investment. Meanwhile, New Jersey’s governor has drawn fire for withdrawing the state from RGGI, a move that’s cost it $114 million to date and an estimated $387 million through 2020.

Value Far Beyond The Northeast US

Regardless of how RGGI revenue is being spent, its overall value is clear. Not only is it decarbonizing our economy while boosting economic growth, but the system is also providing valuable lessons for cutting emissions over a diverse region.

At a recent public event, Maryland Public Service Commissioner Kelly Speakes-Backman said RGGI member states expect easier compliance with the EPA’s Clean Power Plan because they can comply with emissions reductions targets through a regional approach.

Regional cap-and-trade systems have been proposed as an option for other US states to cut emissions through the Clean Power Plan, and California and Quebec have already proposed linking to RGGI. Six years into existence, it’s easy to envision RGGI’s experience holding the key to carbon market success not only in North America, but in the 60+ national and subnational markets implementing carbon pricing.


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About the Author

Silvio is Principal at Marcacci Communications, a full-service clean energy and climate policy public relations company based in Oakland, CA.



  • Frank

    I would just like to add, that adding the costs you suggest wouldn’t cost very much, because, as you suggest, people would avoid paying them. In fact, by the time we decarbonize the electricity part, we might find it’s cheaper, And I’m not even that worried about those now aluminum F150’s. Battery prices are supposed to be dropping 7% a year. Two wheels driven by a little turbo 4, and the other two with an electric motor for torque. Or just go electric. BYD is selling all electric buses. That’s bigger than a F150. I like my Prius a lot, but my new dream is the Tesla Model 3, though if the leaf range goes a little over 100 miles, I might be really tempted.

  • cutter1954

    I understand,perhaps,the rationale behind cap and trade.its a subtle way to nudge large power generators slowly towards less carbon production,while reassuring the public that their rates won’t go up.But over several years,? 2008-2015,RGGI collects $2B÷42 million people=$47 per person which goes towards energy efficiency maybe.Over 7 years.Big whoop.If the 91 million tons of carbon × $37/ton =$80 per person per year,or ×$220/ton=$476 per person per year,were applied then rates would go up and people would react.Obviously they would freak if this was applied tomorrow.But if you knew that at year one there is a tax of fee on carbon of $25 per ton,increasing $15 per ton per year your behavior would change.You would rethink your business case for that Ford F-150 to commute with,the solar install,your opposition to those ugly wind turbines,etc.I think cap and trade is just another example of politicians doing this:we promise you all these nice benefits and the flip side is you don’t have to pay for them.

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