The Regional Greenhouse Gas Initiative, our 10-state carbon cap-and-trade system, has wound up its first full year. The system has worked fine - the auctions went smoothly and all the allowances (each lets a utility emit one ton of carbon pollution) were sold for almost half a billion dollars, spread among various Northeastern states. Another quarterly auction will happen in March.

But the economics aren’t so hot, with prices zooming down to rock bottom. Lower electricity usage due to the recession and perhaps increasing efficiency means utilities have less pollution to cover with allowances. (I wrote about this most recently last month, after the fourth quarterly auction of 2009.) The situation is likely to get worse, not better, this year - or so says this fine analysis from ESAI, an energy analysis firm. The analysis says the per-ton prices need to be five times what they now are, in order to provide incentive for real reductions.

From what I can gather in the news, the chances of a national carbon cap-and-trade system being passed this year are nil, so RGGI will continue to be the standard-bearer for this flawed but interesting market-based approach to pollution control.

Meanwhile, NHBR reports that NH has joined the other RGGI states, pledging to develop a “Regional Low-Carbon Fuel Standard, aimed at reducing by 10 percent the carbon intensity of vehicle, and potentially heating, fuel.” Pledges are easy and implementation is hard, of course, but the mere fact that RGGI exists does give hope.

Tags: rggi; carbon offsets; cap-and-trade