On March 17, the Northeast's 10-state cap-and-trade system, called the Regional Greenhouse Gas Initiative, issued guidelines for the auctioning of allowances under the nation's first mandatory greenhouse gas cap.
The initial auction will start on September 10, 2008 and will be comprised of credits that can be used in 2009, 2010 or 2011. States and generators will submit sealed bids and allowances will be distributed at a uniform price until they have run out. If any allowances remain, they will be transferred to the following auction, set to occur on December 17, 2008. The cap will be instituted on Jan. 1, 2009 and will reduce emissions from power plants by 10 percent by 2020.
The states that have announced that they will participate in the first auction are: Connecticut, Maine, Massachusetts, New Jersey, and New York. New York, Rhode Island and Vermont have pledged to auction all their credits, or as close as they can to it. The minimum price that RGGI will accept bids is $1.86 per ton for the initial auction. Following the first auction, the price will be adjusted according to the Consumer Price Index, or 80 percent of the current allowance market price, whichever is higher. If the price reaches $7 per ton, generators will be able to purchase domestic offsets for up to 5 percent of their emissions. If it goes above $10 per ton, producers could offset 10 percent of their emissions and purchase offset credits from international trading programs. The auctions will take place online.