More RGGI Fail

The Regional Greenhouse Gas Initiative held its 13th quarterly auction last week. According to to RGGI’s contract consultant, the auction only sold 18 percent of the current compliance period allowances, down from 30 percent in the previous auction. No bids were submitted for the next future control period 2014. The clearing prices was once again the floor price of $1.89.

This comes on the heels of news that the secondary market for RGGI credits crashed.

The report found little interest in RGGI credits outside of the power companies that must produce them. Those companies hold 98% of all RGGI credits as of the end of the last quarter, leaving little room for a secondary market. Further, there has been only a single trade of RGGI options contracts since August of 2010.

Investors are also staying away from RGGI allowances in future years. The current compliance period ends on December 31, 2011. The second year compliance period runs through 2014. The price of 2014 RGGI allowances has also fallen to the reserve price, and secondary market trading fell 55% from 4.7 million allowances in the first quarter to 2.1 million in the second. Just 8.3 million allowances were traded between firms not covered under RGGI, and 86% of those trades came after New Jersey’s withdrawal in June.

No one is interested in RGGI credits, and the cap set for for power producers is so high there is no incentive for them to cut emissions. But as we know that was never really the goal of RGGI in the first place. Rather it was designed as an elaborate Potemkin village to make a national cap and trade program more attractive. Of course a national cap and trade would contain lower, more stringent caps.

Sure, greenhouse gas emissions did decline but not due to RGGI but rather the recession and new supplies of cleaner burning natural gas–thanks fracking!

Speaking of the correlation between reduced economic activity and lower emissions, that’s exactly what a national cap and trade plan like the Waxman-Markey plan, which died in previous Congress, would show. Maryland would lose over 31,000 jobs, and 2.7 billion in gross state product.

Given that under Governor O’Malley, Maryland is one of the worst job creating states, why would be backing a state-based version of cap and trade, among other economy damping climate proposals.

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