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By Timothy Gardner
NEW YORK, Sept 11 (Reuters) - Prices for permits to emit the greenhouse gas carbon dioxide in the U.S. East dropped 32 percent in an auction this week amid delays in the formation of a national cap-and-trade market on the pollution.
Emissions prices in the auction, held by the Regional Greenhouse Gas Initiative on Wednesday, cleared at $2.19 per ton for 2009, down $1.04 from the previous auction, states in the region said on Friday.
Optimism about the federal government passing a climate bill with a cap-and-trade market at its heart was much higher in June, the time of the last RGGI auction, a market source said.
“The delay in the climate bill is not a positive sign,” Paul Tesoriero, the director of emissions markets for Evolution Markets in New York. “There is lower optimism now and I don’t think people are buying as much.”
Holders of RGGI emissions permits hope to get some compensation for them once a federal emissions market forms, but the delay in passing a climate bill reduces those chances in the eyes of some market players.
The climate bill passed the House of Representatives in late June. Legislation has been delayed in the Senate but Democratic lawmakers hope to launch their version of the bill in late September.
It was the fifth quarterly auction for RGGI, a group of 10 states that began regulating carbon dioxide emissions from power plants in the East in January. The group formed years earlier amid a lack of U.S. regulation of the gases scientists say are warming the planet. It aims to cut power plant emissions in the region by 10 percent by the end of 2018.
Wednesday’s auction raised more than $66 million for clean energy and energy efficiency programs in the states. The auctions have raised more than $432 million for the plans since the first one in September 2008.
RGGI, Inc officials were optimistic despite the price drop. “RGGI has established a price for carbon, demonstrated that auctions are an efficient and effective way to allocate CO2 allowances and enabled the states to return millions of dollars in benefits to consumers through investment in energy savings and clean energy,” Pete Grannis, commissioner of New York’s Department of Environmental Conservation, said in a release.
Power plants are also emitting less carbon dioxide as the recession cuts electricity demand and amid softer prices for natural gas. Power generators have switched to using more clean burning natural gas as the price for the fuel headed to 7-1/2 year lows. As a result they are burning less coal, which emits about twice as much carbon dioxide per unit of energy.
RGGI’s 2012 allowances cleared at $1.87 a ton in this week’s auction compared with $2.06 a ton in the previous one.
Reporting by Timothy Gardner; Editing by Lisa Shumaker
