MA in Nation's First CO2 Auction

Today, for the first time in the US, there will be an auction for the right to release carbon dioxide. The Regional Greenhouse Gas Initiative, or RGGI, runs the auction. Its goal: to cut the region's carbon pollution by 10 percent over about a decade.

The idea is to make electric power companies buy permits to emit carbon dioxide, which causes global warming. But even supporters of the plan say it's not ambitious enough. WBUR health and science reporter Sacha Pfeiffer explains.

SACHA PFEIFFER: Today's RGGI auction isn't happening in a room packed with people placing bids. In fact, there's no room at all.

PHIL GIUDICE: It is akin to Ebay for CO2.

PFEIFFER: That's Phil Giudice, energy commissioner in Massachusetts. He's sitting at his computer, explaining that this is an online auction for states in RGGI. That includes all of New England, as well as New York, New Jersey, Maryland, and Delaware. Six of those ten states are selling carbon dioxide, or CO2, permits in this first auction. The operators of 233 electric power plants in the region will have to buy them to emit carbon dioxide. Giudice types in a hypothetical bid.

GIUDICE: So they might bid $5 and 200,000.

PFEIFFER: So when you enter 200,000 at $5, what are you buying?

GIUDICE: Yeah, so I am buying the rights to emit 200,000 tons of CO2 between January 1, 2009, and December 31, 2011.

PFEIFFER: The number of permits each state sells is based mainly on its past carbon emissions. Vermont, a relatively clean state, gets about a million permits. States with dirty coal-burning plants get more. New York, for example, has 64 million permits. Massachusetts, 26 million. RGGI is based on the idea that making power plants buy these permits will motivate them to produce cleaner power.

The permits will not be sold for less than a dollar eighty six a ton. How high the price will go, no one knows yet. The bidding will determine that.

GIUDICE: We don't release any information prior to the auction that could affect bidding strategy.

PFEIFFER: Investment firms can buy permits and try to sell them for more money later. But power plants will probably be the main bidders. Take Dominion. It operates two power plants in Massachusetts, one in Connecticut, one in Rhode Island. It needs permits for 10 million tons of annual carbon emissions. Dan Weekley of Dominion says that could cost several tens of millions of dollars.

DAN WEEKLEY: This is just another big increase on the cost of doing business here. I can't tell you that it will actually drive businesses to the point that they're going to relocate, but there's really no question that it's going to increase energy prices.

But Phil Giudice disagrees.

GIUDICE: I expect RGGI to actually help to bring down energy spending by consumers, in particular in the way that it can be put to work for efficiency.

PFEIFFER: By efficiency, he means energy efficiency. Much of the money raised selling permits will be spent on projects such as weatherproofing houses. The money will also go to renewables. Solar, for instance. Seth Kaplan of the Conservation Law Foundation says that could keep electricity bills from skyrocketing.

SETH KAPLAN: If we do this right, the actual effect on the bills that we all pay will be to reduce those bills or to have them go up much, much less. Not doing it right would simply be to send everybody a check or a reduction on their monthly bill.

PFEIFFER: But that's exactly what some states plan to do. If the cost of permits goes above a certain price, Connecticut and New Hampshire will return that extra money to rate payers. Harvard economist Robert Stavins says RGGI has other flaws. He points out that it targets only electricity generators — not other major sources of carbon emissions, such as cars. And, he says, it's too limited.

ROBERT STAVINS: Global climate change is in fact a global problem and therefore it needs to be addressed internationally.

PFEIFFER: Critics also believe the carbon cap isn't low enough. Stavins says RGGI is a lot of work for little result.

STAVINS: I think these approaches are just not sufficient. I think they're mainly symbolic.

PFEIFFER: But RGGI supporters say a symbolic plan is better than no plan. And they say it's a model for the federal government, which has never set mandatory caps on the gases that cause global warming. For WBUR, I'm Sacha Pfeiffer.