Turn to the nation's most objective and informative daily environmental news resource to learn how the United States and key players around the world are responding to the environmental...
Nov. 21 — The nine states in the Regional Greenhouse Gas Initiative want to ensure that emissions continue to decrease even when carbon allowance prices drop as part of a new reserve mechanism being considered for the cap-and-trade program.
The proposed mechanism, an emissions containment reserve (ECR), would be triggered when prices drop below an as-yet-to-be-determined price, at which point the RGGI emissions cap would be lowered as well, RGGI officials told stakeholders Nov. 21. The possible addition of the new reserve mechanism is significant because it could ensure that states continue to control carbon emissions even when market forces and other factors dampen carbon prices.
RGGI already has a cost containment reserve, which is designed to increase the supply of carbon allowances when carbon prices are high. The new mechanism would complement that by decreasing the supply when carbon prices are low.
In addition, RGGI auction prices are subject to a hard floor—called the auction reserve price— currently set at $2.10. The emissions containment reserve is intended to act as “a soft floor,” according to a summary of the RGGI proposal.
“Despite the stated intent of ‘supply,’ rather than ‘price’ control, we think an ECR will impact market pricing expectations,” Timothy T. Cheung, vice president of Washington, D.C.-based ClearView Energy Partners LLC, told Bloomberg BNA in an e-mail.
“It’ll be interesting to see how the new mechanism develops and where RGGI states will set the ECR trigger price,” he said.
The new reserve mechanism was applauded by two of the original architects of the RGGI program, William M. Shobe, director of the Center for Economic and Policy Studies at the University of Virginia, and Dallas Burtraw, senior fellow at Resources for the Future.
“Some guide rails on the path of allowance prices in an emissions trading program are essential to the integrity of the program,” Burtraw told stakeholders in a webinar-based meeting.
RGGI will be accepting public comments on the reserve mechanism and other issues involving its ongoing program review through Nov. 30. The next major step in the program review is the release of a proposed model rule incorporating changes to the program.
The key decision that RGGI states need to make is how to adjust the program’s emissions cap after 2020, when the current cap expires. They are considering a continuation of the current trajectory, which lowers the cap by 2.5 percent per year, or one that lowers the cap by 3.5 percent per year.
Some environmental groups were pushing RGGI to go even further and lower the emissions cap by 5 percent per year.
Chris MacCracken, principal at Fairfax, Va.-based ICF International Inc., told the webinar that the RGGI emissions cap would decline from 78 million tons in 2020 to 57 million tons in 2031, under a scenario where the cap is reduced by 2.5 percent per year. If the emissions cap was reduced by 3.5 percent per year, it would decline to 48 million tons in 2031, he said.
MacCracken said the projected price of RGGI carbon allowances, depending on the cap and emissions trends, would range from a low of $9 per ton in 2031, if no changes are made to the program, to a high of $36 in 2031.
Andrew McKeon, executive director of RGGI, reaffirmed the initiative’s commitment to go forward despite any changes at the federal level.
“We don’t know exactly what the future will bring,” he told the webinar, in a reference to the recent election. “The RGGI states’ commitment to reducing greenhouse gas emissions is unchanged.”
To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y. at GSilverman@bna.com
To contact the editor responsible for this story: Larry Pearl at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)