Fwd: Northeast Carbon Futures Fall to Record Low Amid Permit Surplus

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Northeast Carbon Futures Fall to Record Low Amid Permit Surplus
2010-12-09 23:16:54.715 GMT

By Simon Lomax
Dec. 9 (Bloomberg) -- Carbon dioxide futures in the U.S.
Northeast's cap-and-trade market fell to a record low amid a
surplus of the program's pollution permits.
December-delivered permits from the Regional Greenhouse Gas
Initiative, or RGGI, declined for a second straight day, falling
2 cents to $1.85 each today on the Chicago Climate Futures
Exchange. The 10 states in charge of the cap-and-trade program
sell permits at auction every quarter and today's futures price
is lower than the minimum allowable bid of $1.86 each.
The minimum bid has been considered "a floor price in the
secondary market as well," Peter Shattuck, a carbon-markets
policy analyst at Environment Northeast, an advocacy group based
in Rockport, Maine, said in a telephone interview.
Northeast carbon futures have fallen 20 percent this year.
Prices won't rebound "unless the RGGI states reduce the
quantity of allowances" in the program, Shattuck said.
Each permit, also called an allowance, gives a power plant
the right to emit one ton of carbon dioxide. The surplus of
permits is the result of a gap between the amount of carbon
dioxide released from power plants and the number of allowances
being issued by the Northeast states.
The states set the total number of permits in 2005,
creating a quantity that would account for a rise in emissions
before trading started two years ago. Instead, emissions fell as
the economy slowed, creating a surplus.
The weather, improved energy efficiency and lower prices
for natural gas, the cleanest-burning fossil fuel, also drove
power-plant emissions lower as the worst recession in seven
decades curbed demand for electricity, according to the New York
State Energy Research and Development Authority.
Last week, the regional carbon-trading program auctioned
25.9 million permits for $1.86 each. An additional 19.4 million
permits that were offered at the auction didn't sell at all.
Contracts for 26,000 Northeast carbon dioxide allowances
sold today at $1.85 a permit, according to the exchange's
website. The Chicago exchange's December 2010 contracts for
Northeast carbon permits expire Dec. 31. Permits for December
2011 delivery fell 1 cent today to $1.87 each.

For Related News and Information:
Top environment stories: GREEN <GO>
Stories about U.S. and climate: TNI US CLIMATE <GO>
Global emissions data: EMIS <GO>
Northeast U.S. trading: RGGI <GO>

--Editors: Steve Geimann, John Lear

To contact the reporter on this story:
Simon Lomax in Washington at +1-202-654-4305 or

To contact the editor responsible for this story:
Larry Liebert at +1-202-624-1936 or