Fewer than expected bid for cap-and-trade emission permits

Reuters News
Posted: Sep 07, 2012 1:28 PM
Fewer than expected bid for cap-and-trade emission permits

WASHINGTON (Reuters) - Nine states in the northeastern U.S. cap-and-trade system sold 24.6 million carbon emission allowances at a minimum bid price of $1.93 per ton, selling just 65 percent of permits offered, the program's administrator said Friday.

The states, which take part in the Regional Greenhouse Gas Initiative (RGGI), raised a total of $47.4 million at the auction on Wednesday.

All 22 bidders were seeking the permits to comply with regulations - either electric sector utilities or their affiliates. Only two of those bought quantities of 2 million permits or more.

In previous auctions, some non-compliance entities, such as banks buying for speculative reasons or green groups looking to retire the permits, have played a larger role.

The RGGI is a cap-and-trade system targeting electric sector emissions in nine northeastern and mid-Atlantic states from Maine to Maryland.

Its auction system will serve as a model for California, which will hold its first test auction for its forthcoming economy-wide carbon market in November.

RGGI states are currently engaged in reviewing the program and are expected to recommend changes this year, which could include tightening its emissions cap.

Power plants covered by RGGI emitted an average of just 126 million short tons of carbon dioxide during RGGI's first three-year compliance period, well below the cap set at 188 million tons.

The low emission levels have led to an oversupply of RGGI allowances in the market, limiting demand for permits at both quarterly auctions as well as in the secondary market.

(Reporting By Valerie Volcovici; Editing by M.D. Golan)