Worcester Firm Plays Pivotal Role In Carbon Auction | 10-state cooperative takes first step in greenhouse gas reduction effort
With the conclusion of the first auction of carbon dioxide allowances last week by the Regional Greenhouse Gas Initiative, pollution in Massachusetts became a commodity.
Up until now, power plants have essentially been able to belch out carbon dioxide without limits — but now, through the Regional Greenhouse Gas Initiative, they must buy the right to pollute.
“It’s a landmark event,” said Philip Adams, president of World Energy Solutions, a Worcester firm with a two-year contract to facilitate the RGGI auctions. “People around the world are watching.”
Regional Team
RGGI is a cooperative effort of 10 states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont — to reduce carbon dioxide emissions, which many believe contribute to global warming.
To meet that end, RGGI will hold quarterly Internet auctions of carbon dioxide “allowances” — which are essentially rations of the toxic greenhouse gas. The first auction took place Sept. 25. The second is planned for Dec. 17.
World Energy was expected to release the results of the first auction round by Sept. 29, Adams said.
As dictated by RGGI, power plants in the Northeast that produce more than 25 megawatts of power must buy allowances; if they don’t, or if they go over their limit, they will have to pay fines.
Each allowance represents one ton of carbon dioxide emissions. For the auction, allowances were bundled in groups of 1,000, and bidding started at a reserve price of $1.86 per allowance. All told, there were more than 12.5 million allowances up for bid during the first round, explained Adams.
More than 200 power plants across the 10 states — 29 of those in Massachusetts — vied for the allowances, according to Robert Keough, spokesman for the Massachusetts Executive Office of Energy and Environmental Affairs.
The auctions are also be open to other entities that meet financial standards. However, to minimize companies from buying large chunks of allowances and essentially scalping them to power plants, no single bidder can buy more than 25 percent of the allowances up for auction.
Adams said he couldn’t release the total number of bidders.
In the weeks leading up to the Sept. 25 auction, Keough said it was too early to tell what the auction proceeds would be. Allowances were expected to go for anywhere from $1 to $5 each; depending on that, annual revenues could range from $26 to $130 million, he said.
Whatever the case, the proceeds will be pumped back into the participating states’ economies to promote energy efficiency, which will in turn attract clean energy companies to the area and spur what are referred to as “green-collar jobs,” Adams said.
“RGGI will stimulate investment,” he said. “We can create whole new industries around this.”
Besides the auctions, RGGI’s larger goal is to stablilize carbon dioxide emissions and ultimately reduce them in each participating state by 10 percent over the next 10 years.
Still, the ultimate goal is to encourage power plants to voluntarily begin to reduce their emissions, according to experts — if only for self-serving benefits of keeping costs down.
In the end, the best tack for power plants and other carbon dioxide emitters is to start cutting back now, noted Vincent DeVito, a partner with the Massachusetts law firm of Bowditch & Dewey who has worked extensively with energy law on state and federal levels and once served as U.S. Assistant Secretary of Energy.
There are several federal bills circulating that require mandatory reduction of carbon dioxide, DeVito explained — and there’s a strong likelihood that they will be passed no matter who occupies the White House in 2009, he said. Similarly, Gov. Deval Patrick has continually supported several statutes and initiatives that encourage clean energy use, green jobs and a green economy.
“In essence, you will be able to receive more credits and allowances if you start taking action to reduce carbon emissions now,” said DeVito.
He added that state and federal statutes will eventually require allowances for other sectors, as well. As a result, some companies might want to consider purchasing allowances soon, because the price will ratchet up with each auction.
“We have to put a spotlight on and identify the problem,” agreed Adams. “The ice caps are melting, glaciers are receding, chunks of Antarctica are cleaving off and dropping into the sea.”
Indeed, scientists predict that global warming will raise sea levels and also alter precipitation and weather patterns, forests, crop yields, and water supplies. It could also detrimentally affect animals and humans.
But besides climate change, it’s important for the country to wean itself off foreign energy sources, DeVito said. That’s best accomplished by diversifying domestic supplies and increasing alternative forms of energy.
“It’s a national security issue,” he said. “It’s important on several fronts.”
Taryn Plumb is a freelance writer based in Worcester.
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