Guest post by Ric Werme
Too long title: New Hampshire stays in, NJ probably gets out, 3rd quarter auction sells less than 18% of allowances, secondary market moribund, RGGI soldiers on.
In brief, allowances aren’t selling at the auction, allowances aren’t selling on the secondary market, and things aren’t going to get better soon. Or should that be RGGI has succeeded beyond its wildest dreams but intends to dream on? After all, RGGI will be meeting soon and may try to reduce the number of allowances available in the future.
New Hampshire
First, New Hampshire stays in RGGI for the time being. Last spring it looked like a near certainty that we would leave. The NH House passed a bill to have us withdraw with a veto proof margin. Unfortunately, while the senate agreed, they couldn’t muster a veto proof majority, and given that Governor Lynch had already announced he would veto the bill, it was as good as defeated. Senator Bradley wrote a replacement bill that would keep us in RGGI, but would mandate that most of the auction proceeds would be distributed to ratepayers. While that would essentially emasculate the bill and stop the funding that organizations have been getting, most still supported the amendment. While that did pass with a veto-proof majority, the house refused to go along, and eventually, the Governor got a bill that he vetoed as promised.
This week, with the legislature back in session, the senate took up the veto but failed to override it, and so New Hampshire remains in RGGI.
New Jersey
In New Jersey, the legislature got worked into a frenzy after Governor Christie wrote a document saying he was withdrawing NJ from RGGI. This seemed to me like a great way to bypass legislation, and the legislature didn’t come up with a convincing argument that the Governor had overstepped his bounds. They were able to bring out a bill to maintain membership in RGGI, while it passed the legislature, the Governor has vetoed it, and the legislature may not be able to override. There may also be regulatory maneuvers and lawsuits, so it’s unclear whether New Jersey will be leaving RGGI at the end of the year.
The bids::supply ratio offers insight to the interest
in the current and future auctions.
The auction was held on September 7th, and the key results came out this morning. Auction 12 was seriously undersubscribed, with only 30% of the available allowances selling, a record low. I expected “it might go up a bit” this time, but only “7,487,000, or 17.75 percent, of the 42,189,685 current control period (2009-2011) CO2 allowances offered for sale by the ten participating states were sold.”
I don’t know about all the RGGI states, but I know some, like New Hampshire, had budgeted money in various contracts expecting income from the auctions. These sales may be low enough to not fund those contracts, I’ll have to talk to the folks who handle the contracts and see. I’m expecting the 4th quarter auction sales to be less than this one. Like maybe only 5% or so.
There were also a smaller number of allowances available for the next control period, and I expected producers would start buying some of them. However, “None of the future control period allowances offered in the auction was sold.”
This is either stunning, or producers are happy with the allowances they have, or they’re confident they can buy whatever they need next year and aren’t worried about commodity traders trying to force up the price.
While New Hampshire is still in RGGI, at least its bite is a lot smaller than anyone could have predicted when it went into effect. RGGI’s original goal was “Ten Northeastern and Mid-Atlantic states have capped and will reduce CO2 emissions from the power sector 10 percent by 2018.” Perhaps they should be exclaiming “We’ve succeeded beyond our wildest dreams.”
On Sept. 19th RGGI will start the review at their New York where their headquarters are. The review will:
The 2012 program review is expected to examine the Regional Greenhouse Gas Initiative’s (RGGI) successes and operations, whether it can achieve additional emission reductions, and whether it has caused higher emissions outside its 10 member states’ borders. Businesses and market participants hope the nine participating northeast US states will choose to tighten the program’s cap during its second control period, which will run from 2012 to 2014. Because of a drop in GHG emissions due to the economic recession, the electric sector carbon market is oversupplied with allowances, leading to low prices that many believe aren’t encouraging a transition to cleaner fuel sources in the region.
Hey guys, I thought natural gas was cleaner than coal. Count your blessings! Better yet, declare success and fold.
Report on the secondary market for the 2nd quarter of 2011
The RGGI folks have an external organization keeping an eye on the “secondary market”. After businesses buy allowances from the auction, they can trade them on a secondary market. (The “cap” is the number of allowances offered via the auction and various grants, the “trade” is this secondary market.)
Given that there are plenty of allowances available at the auctions at the floor price, there’s no reason to expect that speculators would be interested in joining the fray. Indeed, the report finds that some 98% of the outstanding CO2 allowances are owned by power companies and affliates and prices of futures contracts that did sell were close to the auction reserve.
One of their duties is to look for evidence of anticompetitive actions in the secondary market and report what they find. Not surprisingly, their synopsis is “We find no evidence of anticompetitive conduct; however, we will continue to evaluate the competitiveness of the market.”
These politicians are so disconnected from reality it is frightening, but the people keep electing them. . . so who’s to blame. . .
Still a waste of public money and even worse taking attention from something important like jobs! Mr. Green still lives but appears to be on life support for the moment.
Regional Greenhouse Gas Initiative. Because it is regional does that mean that any global warming caused is just limited to New England? (Sorry but I could not resist that one)
[Reply: Good one. One thing RGGI will look into is how much power RGGI states are buying from non-RGGI states because it’s cheaper. So we’re getting neighboring states to pollute themselves with plant food. What they don’t use blows on top of us anyway. -Ric]
This is collective insanity. Fabulism.
We have all this crap in UK too. Basically the government likes the AGW bandwagon because it can tax us more and the non-thinking tax-payer can feel less guilty , because the money they pay helps reduce AGW . Our industries are hamstrung by ridiculous laws and taxes emanating from Brussels as EU legislation, hence the need to build more windmills to comply with sustainable energy edicts. Every government we have had has ignored the majority of UK citizens who want to leave the EU.
The simple point that those who govern us seem to forget, is that all governments, town and city councils, senates etc are all useless at spending our money. So for every £1 or $1 collected by those in authority, that is £1/ $1 less that Joe Public can spend on goods or services from companies who need the business to stay afloat. The companies go bust, the workers are laid off and the country’s economy goes into recession.
We are not talking difficult concepts here, but big government does not seem to comprehend it, instead they come out with things like the RGGI, where the only universal understanding achieved is that it is going to cost everyone more money and not make a jot of difference to CO2 emissions.
I really do despair at the ignorance of our “leaders” with regard to taxation, the economy and especially AGW.
Idiotic, nebulous rationalizations in response to the neglegible effects of a fleeting gas. And they want to regulate this? Wacky.
Dave Skokely Wrote:
These politicians are so disconnected from reality it is frightening, but the people keep electing them. . . so who’s to blame. . .
Every try having a conversation with your average Joe / Joanette who is trying their best to be conscious of the environment? I mean a conversation based on fact and reason. Good luck! The green movement is a religion. So much so I think Martin Luther would have had a better chance of converting the Pope than your average environmentalist.
allowances…indulgences…what’s the difference?
WSJ Today:
Solyndra Targeted In Criminal Probe
http://blogs.wsj.com/venturecapital/2011/09/08/what-does-the-fbi-want-from-solyndra/?mod=google_news_blog
In the longer (paper) version:
These were some of the shovel-readiest jobs last year.
Oops… I neglected to mention in previous post:
Thanks for your post, Ric.
RGGI NEARS BRINK OF FAILURE AS CARBON AUCTION HITS NEW LOW; UTILITIES & INVESTORS REFUSE TO BID ON “FUTURE” CO-2 PERMITS
http://newjersey.watchdog.org/2011/09/09/3060/
Obviously, we need Federal bailout money to make it work.
Doesn’t the Constitution forbid separate treaties among the States?
Tell the RGGI-maniacs to Google it.
Out here in CA, our CARB team looks as if they are going to be using some of the revenue from cap-and-trade to fund some REDD projects (i.e., we’ll be paying billions to foreign nations to ‘store’ our excess carbon with their trees. I wonder if Californians would be more against ARB’s actions if they knew the international wealth transfers they have in store for us…)
Any chance RGGI is going to do this or some kind of method to achieve transfer of wealth from the North East to foreign countries?
Without ENRON to run them, these carbon markets are doomed.
Article I Section 10:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Treaty in this context means with another nation. Otherwise the Port Authority of New York/New Jersey would be in big trouble. Or consider; how could you build a bridge such as the Tappan Zee or George Washington to connect two states?
The market for snake oil can change very quickly.
Let’s see if I have my facts straight here:
1) RGGI and California’s cap and trade system exist to penalize fossil-fuel power plants for
burning fossil fuels which emit what the politicians believe are harmful CO2 gases despite evidence to the contrary. Presumably, cap and trade is designed to make these plants eventually go away.
2) Numerous state governors are opposed to nuclear power as well. The gov of Vermont wants to shut their plant down and the gov of NY wants to shut down Indian Point. And California would probably like to see its two nuclear plants go away as well.
3) So no fossil fuel plants and no nuclear plants for these (and probably other) states. So that leaves them with wind and solar which they believe they can get along just fine on despite the unreliable, intermittent and low-density nature of wind and solar power.
I suppose there were times in human history when the masses were even more ill-informed than people in the U.S. and elsewhere are today regarding AGW, fossil fuels, nuclear, solar and wind power. The people of Nazi Germany immediately come to mind. Unfortunately, it really doesn’t make me feel any better even though I wish it did.
If heating oil stays up over $3.50 a gallon this winter I’m seriously considering switching to COAL.
I am all for a carbon tax. Carbon is soot. Filthy stuff. Lets tax the hell out of it.
I am not for a carbon dioxide tax. Carbon dioxide is a trace gas; only one in every 2500 molecules in the atmosphere is CO2. This trace gas cannot possibly produce a drastic change in temperature, even if its concentration doubled several times. It is a life giving gas – the basis of photosynthesis and the source of all the food we eat.
Let’s have more CO2!
(posted this last night at Real Climate. didn’t even make the bore hole)
Jim Petrie
Jean Parisot – that is the funniest thing I’ve read all week, maybe even longer!!!
Article title:
” ……….It wasn’t supposed to be like this”
That is probably what many on the Titanic were thinking on that cold, dark April night in the Atlantic as the ship was going down.
So RGGI and California’s cap-and-trade systems are meant to penalize their fossil fuel power plants due to the assumption that their CO2 emissions are harmful despite evidence to the contrary. I assume this means that they eventually want them to go away.
Meanwhile, governors in Vermont, NY (and perhaps California?) want to shut down their nuclear plants as well without bothering to look ahead to a safer, better nuclear future with nuclear technology like LFTRs and GE-Hitachi’s PRISM reactors.
No nuclear, no fossil fuels. That leaves wind and solar which they presumably think they can get along just fine with despite the low-density, intermittent, and unreliable nature of wind and solar.
I suppose there have been times in human history when the masses were more misled and ill-informed than many are today here in the U.S. and elsewhere regarding fossil fuels, AGW, nuclear power, and wind and solar. The people of Nazi Germany immediately come to mind. Unfortunately, it doesn’t make me feel any better even though I wish it did.
Where’s it all going? Occasionally, we see commentary that gets to the point.
http://blogs.the-american-interest.com/wrm/2011/09/06/under-the-bus-a-pack-of-pouting-greens/
And America wonders…what has gone wrong with America?
Los Angeles had a major power outage early this morning. Take a look at the story and you can see where they are importing their dirty energy from.