- RGGI Regional Carbon Market Gets Off Ground
- April 28, 2009
- Law Firm: Jones Day - Pittsburgh Office
In the absence of a federally regulated carbon market in the United States, regional carbon markets are beginning to take hold. The Regional Greenhouse Gas Initiative ("RGGI"), composed of 10 eastern states (CT, DE, ME, MD, MA, NH, NJ, NY, RI, and VT), which was the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions, recently implemented a carbon credit auction, the first of its kind in the United States. As of March 2009, these states had raised $263 million over the course of three auctions for emission permits.
RGGI initially limits aggregate carbon emissions by power generators in the region to 188 million tons per year and seeks to cut emissions 10 percent to 169 million tons per year by 2018. According to a recent report, RGGI participants emitted only 156.2 million short tons in 2008, already an 8.9 percent drop from 2007, credited in part to high oil costs and an increase in less polluting fuel sources, such as natural gas. The present oversupply of credits resulting from the drop in emissions would be expected to lead to a significant drop in the cost of carbon credits.
California is proposing to align with other western states and Canadian provinces to create a regional carbon market for electricity sources, industrial sources, transportation fuels, and commercial and residential sources. The state committed to reduce emissions to 1990 levels by 2020 in the California Global Warming Solutions Act of 2006 (AB 32). As part of its Scoping Plan to meet the 2020 emissions limit, the California Air Resources Board committed to develop a state greenhouse gas emission cap and trade program (enforceable beginning in 2012) designed to link to partner programs of other states and provinces within the regional Western Climate Initiative.