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Last week the Chicago Climate Exchange (CCX) began trading of emission permits under the Regional Greenhouse Gas Inititative (RGGI). The RGGI consists of 10 member states and is the first cap-and-trade system in the US that makes it compulsory for power plants to either adhere to the stipulated emission levels or purchase more permits.
The system is being touted as one that will pave the way for a more comprehensive carbon trading scheme in the future - since both the presidential candidates are in favor of a federal carbon market. However, as of now the scheme has set caps that are higher than the emission levels of the region and as such will not bring about any serious co2 cutbacks. The EU made the same mistake in its first phase, when it doled out more permits than were needed and as a result prices of EU permits crashed in 2006.
RGGI permit prices are currently hovering around $5- a fraction of the cost of EU permits. At this level, it will be cheaper for power generators to offset their emissions through purchase of permits, instead of taking much-needed steps such as switching to natural gas or using CCS technology.
{ 2 comments… read them below or add one }
Actually there are 10 states involved - Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New Jersey, New York, Rhode Island, Vermont.
Also you mention that now the scheme has set caps that are higher than the emission - not really correct, the emissions level are actually about the same level.
I wrote a similar blog at http://www.virid.us/blog
Marc, I stand corrected: indeed, there are 10 states involved. I have made the correction in my post (and RGGI needs to do the same on their ‘About RGGI’ page - http://www.rggi.org/about.htm). Thanks for pointing out.
Not sure about your second claim though, both the articles that I have linked to state otherwise. But even if you’re right, the crux remains the same- that stricter emission levels are in order.
That said, I do concur with your post, that RGGI holds much promise.
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