Today on the auction block: carbon emission allowances

Posted Sept. 03, 2014, at 11:17 a.m.

The 25th carbon allowance auction through the Regional Greenhouse Gas Initiative (RGGI) starting today is bringing out supporters and opponents of the Northeast cap-and-trade program.

Supporters like the Natural Resources Council of Maine argue that the nearly $50 million paid by Maine producers for carbon allowances have supported investments that will provide long-term environmental and economic returns (they debuted two case studies to that effect at a press conference today).

Opponents like the Maine Heritage Policy Center argued in a recent report that the program hampers the state’s economy by raising costs for the six participating power plants in Maine and the rest across the region.

That group posits that leaving RGGI would have economic benefits for Maine, a debate that is reaching a fever pitch in New Jersey, where a court found earlier this year that Gov. Chris Christie violated state law in withdrawing from the regional program. Christie said the program was ineffective at fighting global warming.

Meanwhile, the Obama Administration cited the program as a model for the rest of the country when it announced new goals for power plants to reduce emissions by 2030.

The case study NRCM released today tracks efficiency investments Hannaford Supermarkets made in lighting retrofits and refrigeration units at 10 stores that it estimates will save about $200,000 in energy costs annually.

Since its inception in 2008, the program has brought in about $1.75 billion for efficiency investments across the participating Northeast states.

The stakes for both sides of the debate over RGGI are higher this year as the prices for carbon credits under the program are on the rise and the EPA’s proposed rules are under fire from 12 states.

The credits up for auction today correlate to the total cap on carbon emissions, which was cut in half starting this year, to about 91 million short tons.

The results of the auction starting today will be released in a few days, but the previous auction saw allowance prices hit a new high of $5.02 and they are expected to increase.The MHPC study, based on economic modeling from the Beacon Hill Institute, estimates those rising costs mean $106 million to $132 million in costs to electricity consumers from 2015 to 2020.

Supporters argue the benefits of the projects supported by efficiency investments through RGGI will have a longer-term payback. Colby College economist and professor emeritus Tom Tietenberg, in relation to the NRCM case studies, said that “from an economic perspective, joining RGGI has turned out to be one of the best policy decisions Maine has made in the last decade.”

There are many forces at play, but overall power generation from power plants reporting quarterly emissions to RGGI has declined since 2009 and production levels correlate closely with emissions, according to data from RGGI and the U.S. Energy Information Administration.

A study completed earlier this year found that declining emissions do not translate to economic contraction, despite the fact that rising emissions correlated closely with increases in the state’s real GDP from 1990 to 2003.

As the prices in auction credits rise, that stands to have a greater impact on power production at the six Maine plants that fall under RGGI’s purview. Those changes could also encourage greater power plant efficiency, which has not fluctuated substantially at any of the power plants in question since 2009.

Below is a closer look at emissions at each of the RGGI participant power plants in Maine from 2009 to 2014 in the charts below.

Hover over a particular plant for more information about its fuel sources, ownership and other metrics.

 

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