U.S. Northeast Cap-and-Trade Plan Said to Cut Carbon Cap

The U.S. Northeast’s cap-and-trade program, which has been hindered by pollution caps that surpass carbon emissions, is expected to lower its limit by as much as 45 percent today, according to the Natural Resources Defense Council.

Companies in the nine states that participate in the Regional Greenhouse Gas Initiative will be allowed to emit a total of about 91 million tons of carbon dioxide annually under the new rules, Dale Bryk, a director and attorney at the New York-based environmental group, said yesterday in an interview.

That’s comparable to the amount of carbon released last year by companies in the six New England states, New York, Delaware and Maryland, and significantly less than the current cap of 165 million tons. The disparity creates little financial incentive to reduce emissions and a lower cap may curb pollution, Bryk said.

“They had an inflated cap -- it’s no secret,” Bryk said. “Everybody knows that the limit for the pollution is above what the actual pollution is.”

NRDC advised the states that created RGGI, which held its first auction in 2008. Cap-and-trade programs require companies to buy permits to emit greenhouse gases. The permits are traded and prices rise when demand approaches or exceeds supply.

RGGI Inc., the New York-based non-profit that administers the program, said in January that it had started a review process that was included in its original bylaws.

RGGI will make an announcement today and Jason Brown, a RGGI spokesman, declined to provide additional details.

Reduced Demand

The original cap was set based on estimated 2009 emissions levels that assumed that carbon output would increase, Bryk said. Wider use of natural gas and more energy-efficient systems have helped drive down emissions in the nine-state region by 30 percent from 2005, reducing demand for RGGI 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 program in 2011 after the state’s Republican 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. About half of the allowances offered - -19.8 million of 37.6 million -- were purchased, the fewest since September 2011. Each permit gives a company the right to emit one ton of carbon dioxide.

The auction raised $38.1 million. The proceeds fund state renewable-energy efforts and programs that help low-income people pay utility bills, or go into their general funds.

Before it's here, it's on the Bloomberg Terminal.