On September 25, 2008, members of the Regional Greenhouse Gas Initiative (RGGI) conducted their first greenhouse gas (GHG) emissions allowance auction as part of a regional cap-and-trade program that goes into effect on January 1, 2009. RGGI includes ten Northeast and Mid-Atlantic states, and is the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions. All fossil fuel-fired power plants with a capacity of 25 megawatts or higher are required to comply with the regional GHG emissions cap through reducing emissions or purchasing allowances, with each allowance authorizing one short ton of carbon dioxide (CO2) emissions. The September 25 auction was the first of two pre-compliance auctions for the 2009-2011 period of the RGGI program; remaining pre-compliance allowances will be available during the second auction on December 17, 2008. The first auction was also limited to allowances from six RGGI states: Connecticut, Maine, Maryland, Massachusetts, Rhode Island, and Vermont. Pre-compliance allowances from Delaware, New Jersey, New Hampshire, and New York will be sold during the December auction after these states finalize their regulations. Auctions taking place during the regular, three-year compliance periods will occur on a quarterly schedule.
The RGGI GHG emissions cap, state emissions caps and allowance distribution, and auction design were developed collaboratively between the RGGI states. The September auction put 12,565,387 CO2 emissions allowances on the market in a sealed-bid, uniform-price format, with a reserve allowance price of $1.86. In this and future auctions, bids take place in multiples of 1,000 allowances. Bidders must meet specific qualification criteria, and may not bid for more than 25 percent of the total available allowances offered in each auction. Once the compliance period begins in January, allowances will become tradeable as power plants adjust their GHG emissions levels. Through the RGGI program, CO2 emissions from fossil fuel-fired power plants will be stabilized through the 2009-2014 compliance periods, and will be reduced 10 percent by 2019.