The latest RGGI auction had the worst showing since RGGI got started. Now we know why Chris Christie pulled out of it!
How bad was the RGGI auction?
Epic fail. The Regional Greenhouse Gas Initiative tries hard not to admit that. But their own press release embarrasses them further. Of about 42 million CO2 allowances (each for one metric ton) up for auction, only 12.5 million, or 30 percent, sold. Furthermore, the sold at $1.89 per ton. That was the reserve price of the RGGI auction.
Your editor has bought and sold items at auction on eBay. Reserve auctions always risk not selling—or, as in this case, not selling all the goods up for auction.
Furthermore, the electric generators bought 91 percent of the allowances that sold. The idea behind RGGI was to let speculators buy the allowances and then “scalp” them. That would force the electrics to find “cleaner” ways to make electricity.
How did RGGI spin it?
RGGI couched their release in language that would embarrass any high-school debate team member. Their headline read:
Regional Clean Energy Economy Boosted with $25.5 Million in RGGI Auction Proceeds
Come on! As Bill O’Reilly would say, they’re spinning like tops! That’s $25.5 million, split ten ways. (New Jersey is still in it until the end of this year.) And if the electrics bought most of the allowances, and still left the lion’s share of them on the table, how does that force them to “go green”?
What does this really mean?
It is yet another sign that the Northeastern economy is in a double-dip recession. The electrics left the allowances on the table because they won’t be making as much electricity. When the motors aren’t running, you don’t need that much juice to run them.
It’s a sign of something else, too: the electrics know that RGGI is about to fold. New Jersey’s governor pulled out on his own. New Hampshire’s legislature passed a pullout bill. (The governor threatens to veto that, and the New Hampshire Senate might, or might not, override that veto.) Delaware and Maine are also looking into pulling out. (Source: New Hampshire Watchdog.)
How did the States really spend their RGGI auction money?
They were supposed to spend it on “green energy” projects. Some States did just that. But others, including New Jersey, used RGGI Auction proceeds to balance their budgets.
But auction performance has been weak since June of 2010. This is the third quarterly RGGI auction that left CO2 allowances on the table, and the first that left more than half of them on the table.
Chris Christie said earlier that RGGI had become an expensive gimmick. More likely, RGGI was supposed to be a lucrative gimmick. It isn’t any longer, and hasn’t been for a year. No wonder Christie pulled out—the trifling sums he was getting from the auctions were not worth the political price he knew he would pay.
One hopes that RGGI will die. That six other States can keep it going with any meaningful results is hard to imagine. Results of RGGI auctions of future CO2 allowances show that the next RGGI auction might likely have worse results than the one that just finished, and the next one will have worse results still. Nor do traders on the Chicago Climate Exchange seem to be any more enthusiastic. In fact, CO2 allowances there closed two cents less than the recent reserve auction price!
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Bottom line: the RGGI auction seems of little use to anybody. The only reason anyone has to keep it going is ideological. And with the prices so low, it won’t even serve its driving ideology.
Terry A. Hurlbut has been a student of politics, philosophy, and science for more than 35 years. He is a graduate of Yale College and has served as a physician-level laboratory administrator in a 250-bed community hospital. He also is a serious student of the Bible, is conversant in its two primary original languages, and has followed the creation-science movement closely since 1993.
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