Low prices hang over the Regional Greenhouse Gas Initiative (RGGI) as the next auction for carbon dioxide emission allowances approaches.
In the last auction, held in March, CO2 allowances sold for $3/short ton, the lowest price in more than three years.
The upcoming auction, scheduled for June 7, will include revisions, such as an adjustment to the reserve price, which for 2017 is set at $2.15 per ton of CO2.
RGGI is under pressure, but not only from low prices. It also faces the prospect that another state will quit the program. A proposed bill in New Hampshire calls for the state to exit RGGI. Critics of the regional cap-and-trade scheme say it pushes electricity prices higher.
In May 2011, under Gov. Chris Christie, New Jersey exited RGGI. With Christie’s last term as governor drawing to a close, some lawmakers in the Garden State are looking to bring the state back into RGGI.
RGGI is the nation’s first mandatory cap-and-trade program for greenhouse gas emissions. It includes nine states on the Eastern Seaboard, from Maine to Maryland.
The program’s original objective was to reduce the CO2 emissions of each state's power sector by 10% from their 2009 allowances by 2018. But the growth of gas-fired generation spurred by low natural gas prices, combined with the effects of state renewable energy mandates have resulted in CO2 emissions in the region falling below the original RGGI cap. That cap was reduced in 2014 by about 45% from the 2009 level. But even with a reduced emissions cap, actual emissions have remained well below the cap.
In March the auction prices were 16% lower than in the December auction and 60% lower than the peak of $7.50/ton in the December 2015 auction.
A May 2017 Congressional Research Service report said the program’s direct contribution to reducing global GHG emissions was “negligible,” but that it could stimulate action on the part of other states and could be “instructive for policymakers seeking to craft a national program.”