U.S. Northeast Cap-and-Trade Group Plans Permit Reduction

Regional Greenhouse Gas Initiative Inc., the nonprofit that administers the U.S. Northeast’s carbon-dioxide emissions program, proposed reducing the number of available permits by 45 percent to drive up prices.

Power plants in the nine states that participate in the program will be allowed to emit 91 million tons annually starting in 2014, down from 165 million tons this year, according to rules proposed in a statement today on RGGI’s website. The limit would fall another 2.5 percent a year from 2015 to 2020.

Reducing the number of permits may drive up prices more than sixfold to $10 by 2020 and while cutting emissions from power plants by 45 percent from 2005 levels, the organization said. Each permit gives a company the right to release a ton of carbon dioxide and making them scarcer would provide financial incentive to produce less greenhouse gases.

“These program changes will lower emissions and provide funds to ensure our energy needs are met in the cleanest, safest way possible -- with energy efficiency and renewables,” Valerie Strauss, interim executive director of the Alliance for Clean Energy New York, said today in an e-mail.

The six New England states, along with New York, Delaware and Maryland, will use the RGGI proposal to revise state emission policies.

“The changes in the program put forward today will allow us to continue moving toward a cleaner energy future in a manner that is consistent with the need to keep power cheap, strengthen our economy, and grow jobs,” Daniel C. Esty, commissioner of the Connecticut Department of Energy and Environmental Protection, said in the statement.

Cheap Permits

New York Governor Andrew Cuomo in his State of the State address last month proposed lowering the emissions cap to curb climate change. New Jersey exited the group in 2011 after Governor Chris Christie called it a failure because the permits never sold near their projected costs of $20 to $30.

Permits at the quarterly RGGI auction in December sold for $1.93, the minimum bid, and 48 percent went unsold, the most since September 2011.

Higher prices for emission permits will increase average power bills by less than 1 percent, RGGI said.

The current cap of 165 million tons exceeds 2012 emissions of 91 million tons. That disparity has held down demand for permits, according to Dale Bryk, an attorney for New York-based Natural Resources Defense Council.

By reducing the number of permits, “they’ve fixed the problem,” Bryk said today in an interview.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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