UPDATE: CO2 Price In Northeast US Auction Hits Lowest Level
December 04 2009 - 12:26PM
Dow Jones News
Allowances to emit greenhouse gases in the Northeast U.S. sold
for $2.05 a ton in the latest auction held by a 10-state
cap-and-trade program, falling to their lowest level yet.
Auction prices under the Regional Greenhouse Gas Initiative, or
RGGI, continues to fall as a slump in power demand and weak natural
gas prices drive an ongoing glut in allowances. But a coming global
conference on climate change and a possible federal cap-and-trade
programs likely kept the price from slipping to the lowest allowed
level of $1.86 a ton of carbon dioxide.
"What is really driving the market is the politics of carbon,"
said Emilie Mazzacurati, manager of North American carbon market
research for energy-market research firm Point Carbon.
RGGI places a limit on emissions from power plants of
heat-trapping gases linked to climate change. Under the program,
emission allowances are auctioned off, with power companies buying
and selling them depending on their continuing emissions. States
from Maine down to Maryland are members of RGGI, which is the
nation's first market-based, mandatory cap-and-trade program for
CO2.
The auction, results of which were released Friday, raised $62
million for the participating states. The money, which totals
nearly $500 million to date, was earmarked in many states for
efficiency and clean energy programs, but its use has come under
pressure amid large budget gaps.
Auction prices reached their highest level for the year-old
program in March clearing at $3.51 a ton. But since then prices
have fallen with auction results this week more than 6% below the
last auction held in September.
Mazzacurati said the RGGI market remains oversupplied and on
track this year to have a more than 40 million-ton mismatch between
the annual cap on which allowance auctions are based, and actual
power plant emissions.
But she said the market is finding some price support from
interest around international climate change talks in Copenhagen
this month. Additionally, the way in which regional allowances
would be incorporated into a federal CO2 program could benefit
buyers at current prices, since an exchange under pending
legislation would be based on an average price, Mazzacurati
said.
"What we are seeing is the great return of the speculators," she
said, pointing to an uptick in the auction in buyers that aren't
power plant operators.
As for allowances that can be used for 2012 and beyond, the
auction price this week settled at the lowest allowed level of
$1.86 a ton. The auction also was undersubscribed.
A total of 28.6 million and 1.6 million allowances for 2009 and
2012, respectively, were sold in the auction. This week's auction
was the sixth under RGGI. The next auction is set for March 10.
-By Mark Peters, Dow Jones Newswires; 212-416-2457;
mark.peters@dowjones.com
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