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Some CO2 Permits Don't Sell in U.S. Northeast Auction (Update2)
2010-09-10 15:20:56.587 GMT
(Updates with trader comment, surplus pollution rights from
the fourth paragraph.)
By Simon Lomax
Sept. 10 (Bloomberg) -- Carbon dioxide permits in the U.S.
Northeast's cap-and-trade program for power plants drew a record
low price at auction this week amid a surplus of the pollution
rights. Some went unsold.
Permits from the Regional Greenhouse Gas Initiative's first
"control period" from 2009 to 2011 fell 2 cents from the last
auction held in June to $1.86 each, the minimum allowable bid,
according to the cap-and-trade program's website. Each permit
represents one ton of carbon dioxide.
Of the 45.6 million permits offered from the first control
period, 34.4 million were sold. This week's auction, held
Sept. 8 with the results released today, also offered 2.14
million permits from the 2012-to-2014 control period. Of those,
1.31 million sold for the $1.86 minimum allowable bid, the same
price they fetched in June.
The failure to sell a quarter of the permits offered in
this week's auction has "definitively shown that the market is
oversupplied," Paul Tesoriero, director of environmental
trading at Evolution Markets LLC in White Plains, New York, said
in a telephone interview. "People are not going to buy
something they don't need."
Surplus of Permits
A gap between the carbon dioxide output from power plants
and the number of permits being issued by the Northeast states
has created a surplus of the pollution rights. The states
decided in 2005 how many permits to issue, leaving room for
emissions to rise before trading began in the regional carbon
market. Instead, emissions fell as the economy slowed.
The cap-and-trade program, which spans 10 states from
Maryland to Maine, now issues 188 million permits a year. Power
plants in the region released 136 million tons of carbon dioxide
last year by burning fossil fuels such as coal and natural gas,
according to Bloomberg New Energy Finance estimates.
The states that run the cap-and-trade program will spend
most of the $66.4 million raised in this week's auction on
"investments in energy savings and clean energy," David
Littell, commissioner of the Maine Department of Environmental
Protection, said in an e-mail.
In the secondary market, permits for December delivery fell
1 cent to $1.90 each on the Chicago Climate Futures Exchange at
10:56 a.m. New York time.
For Related News and Information:
Top energy stories: ETOP<GO>
Top power stories: PTOP <GO>
Emissions-trading stories: NI ENVMARKET BN <GO>
--Editors: Richard Stubbe, Charlotte Porter.
To contact the reporter on this story:
Simon Lomax at +1-202-654-4305 or slomax@bloomberg.net
To contact the editor responsible for this story:
Dan Stets at +1-212-617-4403 or dstets@bloomberg.net
