Carbon Pollution Auction Kicks-Off September 25th

envecon PROVIDENCE, RI (September 23, 2008) For the first time ever a price will be put on carbon dioxide emissions from power plants in the United States under a historic “cap and trade” emissions auction set to begin on September 25. The Regional Greenhouse Gas Initiative (RGGI), a global warming agreement among 10 northeast and mid-Atlantic states, including Rhode Island, will set an overall cap on global warming pollution from power plants and then auction limited allowances to pollute up to that cap on an open market.

The Conservation Law Foundation (CLF), a leading New England environmental group that has been active in the creation of RGGI, hailed the auction as a critical step forward in building the new technologies and solutions that will help reduce the greenhouse gas emissions that cause global warming. In most states, proceeds from the auction will be used to deliver savings to consumers by supporting energy efficiency measures that reduce electricity usage.

“The RGGI auction that kicks off this week is the sort of innovative, market-based solution that our region needs to adopt in order to curb and eventually reduce harmful global warming pollution,” said Cynthia Giles, Director of CLF’s Rhode Island Advocacy Center. “By limiting and then putting a price on carbon dioxide emissions, we’re sending the message that polluters must be held accountable for the role they play in contributing to climate change.”

>> BACKGROUND AND Q&A ABOUT THE RGGI AUCTION:

Q: What is RGGI and why is the carbon auction such a big deal?

A: RGGI, the Regional Greenhouse Gas Initiative, is an agreement among 10 northeast and mid-Atlantic states to reduce greenhouse gas emissions from power plants within their borders. For the first time ever, RGGI will set a price on carbon dioxide emissions in the United States, holding polluters accountable for the impact their emissions have on a changing climate.

Q: How does the RGGI “cap and trade” carbon auction work?

A: The primary mechanism RGGI will use to reduce emissions is the first-ever mandatory “cap-and-trade” program that kicks off with the September 25 auction in which the RGGI states will set a limit or “cap” on carbon dioxide emissions in the 10 state region and then auction allowances to pollute up to that cap on an open market. RGGI limits emissions at projected 2009 levels through 2015 and then lowers the cap by 2.5% per year to reduce emissions 10% below 2009 levels by 2019.

Q: How does setting a price on carbon help curb climate change?

A: By putting a price on carbon, the RGGI auction gives polluters an economic incentive to develop the innovative solutions and technologies that will help them emit less greenhouse gas emissions into the atmosphere. The lower their emissions the less polluters will have to pay. Eventually, if they reduce their emissions enough they will be able to sell their allowances for a profit.

Q: What specifically happens on September 25?

A: On September 25 the auction will officially open a process to determine the fixed price for carbon emissions. The fixed or “uniform price” will be announced several days later after a multi-day process in which participants in the auction first electronically bid the price they are willing to pay for a specific amount of pollution allowances. Bids are then ranked in a stack from highest to lowest. Next, the highest bids are “filled” down the stack until the available supply of allowances is used up. The price offered by the last bid that gets an allowance determines the “uniform price” that will be paid by all participants in the auction.

Q: What sort of polluters are covered under the RGGI auction?

A: RGGI regulates emissions from the 233 fossil-fueled power plants in the 10 state region that produce 25 megawatts or more of electricity.

Q: Where does the revenue from the auction end up?

A: Proceeds from the auction of allowances are delivered directly to the states based on the amount of allowances each state receives. Most participating states have developed a plan to allocate the proceeds from the auction to energy efficiency measures – like weatherization and insulation programs – that will deliver savings to consumers and businesses by helping them reduce the amount of electricity they use.

Q: Will electricity prices rise because of the RGGI auction?

A: Any small price increase is expected to be offset by the savings delivered to consumers through energy efficiency programs that will help them reduce the actual amount of electricity they use.

Q: What are the states participating in RGGI?

A: Participating states include Maryland, Delaware, New Jersey, New York, Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire, and Maine.

For more information visit www.rggi.org or to speak with a CLF expert on RGGI call Colin Durrant at 617-850-1722.

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