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Friday, December 19, 2008

Heeere's Reggie!

New Hampshire Enters the Carbon Cap and Trade Era
By Grant Bosse

An online auction has netted New Hampshire more than $4 million. On Wednesday, New Hampshire participated in its first ever auction of carbon dioxide allowances, which sold for $3.38 each, according to RGGI, Inc. Granite State regulators put 1.2 million allowances up for bid in an auction featuring 31.5 million allowances from ten states. 69 potential buyers placed their bids through a website administered by World Energy, a private company contracted by the ten-state Regional Greenhouse Gas Initiative (RGGI) to auction off the right to emit carbon dioxide.

The $4 million will be deposited in the Regional Greenhouse Gas Reduction Fund, which must go towards energy efficiency and conservation programs. The Legislature has already dedicated $1.2 million from the Fund towards the state's weatherization program. The Public Utilities Commission is responsible for distributing auction revenues.

Beginning on January 1, 2009, any fossil-fueled power plant producing over 25 megawatts of power must obtain allowances for every ton of carbon dioxide (CO2) it produces. In New Hampshire, five power plants are so regulated, accounting for an average of 8.62 million tons of CO2 per year. This is the second precompliance auction under RGGI, but the first in which New Hampshire has put its allowances on the auction block.

Potomac Economics, an independent private firm hired to monitor the quarterly carbon auctions, released its preliminary report on Wednesday’s auction today. Potomac will release a more detailed report next month. States will confirm and transfer allowances by January 5, 2009, which can then be bought and sold on the secondary market.

On September 25, 2008, six states offered a total of 12.5 million allowances, which sold at a clearing price of $3.07. RGGI allowances closed Thursday at $3.27 on the Chicago Climate Futures Exchange (CCFE) and $3.30 on the New York Mercantile Exchange (NYMEX).

Under the Regional Greenhouse Gas Initiative, New Hampshire and nine other northeastern states have capped the amount of carbon dioxide that local power plants can release into the environment, and required them to bid for the right to do so. Joe Fontaine, Emissions Reductions Trading Program Manager with the New Hampshire Department of Environmental Services, says that between the ten states, CO2 production will be capped at 188 million tons per year for the next three years, and gradually reduced by a total of 10%. Each state will receive a predetermined slice of revenues produced from those auctions based on its historic carbon emissions prior to the agreement. This ratio will not change, regardless of any change in carbon output from each state throughout the life of RGGI.

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