March 7 (Bloomberg) -- The cost to emit carbon dioxide in the U.S. Northeast rose by a third after the region’s cap-and-trade program revised its rules to cut the supply of permits.
Regional Greenhouse Gas Initiative Inc. auctioned 23.4 million allowances for $4 each at its March 5 event, up from $3 in December, according to a statement posted today on the New York-based nonprofit group’s website. This was the first event under new rules that were announced in February 2013 and took effect this year.
The $4 clearing price is the highest since the group began auctioning allowances in September 2008, and many of the quarterly events failed to exceed the minimum bid. Critics said that indicated that the market wasn’t working, including New Jersey Governor Chris Christie who called it a failure when he pulled the state out in 2011. RGGI cut the supply of permits 45 percent this year in an effort to drive up prices.
“Our first auction under the new cap demonstrates how market-based programs cost-effectively reduce carbon pollution, while driving investments in a clean-energy economy,” Collin O’Mara, secretary of the Delaware Department of Natural Resources and Environmental Control and RGGI’s vice chairman, said in the statement.
The sale generated proceeds of about $94 million, compared with $115 million in December when about 63 percent more allowances were sold.
The cap-and-trade program is designed to curb pollution from power plants and each allowance gives companies the right to emit one ton of carbon dioxide. RGGI comprises the six New England states, New York, Delaware and Maryland. Auction proceeds are used for renewable-energy programs, assisting consumers with utility bills and padding states’ general funds.
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