In 2012, the Regional Greenhouse Gas Initiative (RGGI) will look to build upon the success of its first three-year compliance period and make key improvements as it enters a second three-year compliance period. In an effort to strengthen the existing initiative design and achieve desired emission reductions, RGGI states are retiring allowances not sold in the first phase, increasing the reserve price of allowances, conducting a comprehensive review, and considering a reduction to the number of available allowances to ensure further emission cuts. RGGI’s goal is to reduce the carbon dioxide emissions from power plants in member states by 10 percent by 2018 through a cap-and-trade program.
On January 17, 2012, RGGI member states announced several actions to reduce the number of available emission allowances. First, auctions in 2012 will only offer allowances for 2012 and none from the next compliance period (2015 to 2017). Second, at least five states (Connecticut, Delaware, Massachusetts, New York, Rhode Island, and Vermont) agreed to retire unsold allowances from the first compliance period, which could otherwise have been used in later compliance periods. With fewer total allowances available for auction, cumulative emissions will be forced downward. Many states have faced an oversupply of allowances as emissions from power plants are approximately 30 percent less than the cap, owing in part to the economic recession and investment in natural gas and renewable electricity generation (Regional Cap-and-Trade Effort Seeks Greater Impact by Cutting Carbon Allowances).
Beyond withholding future compliance period allowances and retiring unsold allowances, RGGI may also consider additional measures to increase the market pressure on electricity generators to reduce carbon emissions. In 2012, the reserve price for allowances will rise from $1.89 to $1.93 (RGGI CO2 Allowance Auctions - Frequently Asked Questions). Tightening annual emission caps may be an additional option identified by RGGI’s first mandated program review, which will be completed in summer 2012.
The economic benefits from RGGI’s first compliance period were significant. An Analysis Group report released in November 2011 estimated that RGGI produced $1.6 billion in economic value for its member states between 2009 and 2011. The proceeds from sales of RGGI allowances have funded energy efficiency improvement programs, community-based renewable energy projects, assistance to low-income customers, education and job training programs, and state general budget funds.
RGGI Press Release - 2012 Auction Update
"New York voiding gas credits"