A quarterly auction of Regional Greenhouse Gas Initiative carbon dioxide allowances scheduled for Wednesday likely will reverse the trend of unsold CO2 allowances, an analyst said Monday.
Buyers are expected to buy all 34.843 million CO2 allowances offered for sale, according to Peter Shattuck, carbon markets policy analyst at Environment Northeast. That would mark only the second time in about 18 months that a RGGI auction sells every CO2 allowance for sale.
The prior lack of buying interest can be attributed to the oversupply of CO2 allowances, as emissions from power plants located in RGGI participating states have been well below the cap since the program began in 2009.
The outlook for 2012 is no different, but power plant owners might regard Wednesday's auction as a good opportunity to pick up CO2 allowances for a lower price than will be soon available, Shattuck said.
Such a scenario would play out if RGGI's members move to lower the emissions cap beginning in 2014, thereby limiting the number of CO2 allowances in circulation, he said.
Representatives from the nine states RGGI comprises currently are discussing a proposal to shrink the cap. The group is supposed to issue a set of recommendations this summer. Individual states would have to approve any decision to decrease the size of the cap through a legislative or rulemaking process before the decision goes into effect.
RGGI's cap currently equals 165 million short tons of CO2. A single CO2 allowance equals 1 st of CO2. Emissions from power plants in RGGI participating states averaged 108 million st from 2009 through 2011.
The emissions figures for 2012 will probably be close to this three-year average, Shattuck said.
States participating in RGGI are Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont.