The Regional Greenhouse Gas Initiative (RGGI) has set dates for the first set of auctions for carbon dioxide emission allowances. RGGI is a regional program whereby ten Northeastern states have entered into agreements, developed model rules, and passed legislation and have or are developing their own state regulations to implement the regional CO2 cap-and-trade system covering power plants.
The dates for auctioning the allowances required by the regulated power plants to continue operating have been set for September 10, 2008 and December 17, 2008. These auctions will be the first sale under the first mandatory or compliance greenhouse gas regulatory system in the United States. Most of the emission allowances may be auctioned under RGGI rather than provided for free as in the case of the European Union’s Emissions Trading Scheme (EU ETS).
Other states are working on such a system including California and several Western states, Canadian provinces, and Mexican states, and a separate group of Midwestern states.
The RGGI auctions will initiate the compliance trading market in the United States. As this market develops, one significant issue will be whether the RGGI system has over allocated the number of allowances, as the EU ETS did in its initial phase. In that case, the price for the allowances dropped to near zero. The development of the market for RGGI allowances will be interesting given that many parties have asserted that more allowances have been issued to states for sale or allocatin than are required to allow the emissions of CO2 from the regulated power plants.
