Supreme Court Freeze Drives Down Northeastern U.S. Carbon Price

A sharp drop in carbon prices in the Regional Greenhouse Gas Initiative (RGGI), the cap-and-trade program in the Northeastern United States, can be attributed to the Supreme Court’s decision to freeze implementation of the Obama administration’s Clean Power Plan, according to a Department of Energy analysis.

Since that decision, carbon prices under RGGI have fallen 40%, from US$7.50 to $4.53 per tonne. They had previously increased steadily, from $2.00 in 2012 to $7.50 last December.

New!

“Experts disagree about what the sudden drop means for the future of carbon cutting in the Northeast and what direction the prices will go,” Climate Central reports. “Long-term low carbon prices could make it cheap to cut carbon throughout the Northeast, or it could chill future investment in renewables and other carbon-cutting measures because it will be less profitable to do so.”

“Low RGGI prices hamper the region’s ability to pursue additional carbon cuts,” and make clean energy investment less profitable, said Acadia Center clean energy analyst Jordan Stutt. But one of the designers of the RGGI carbon auction, public policy professor William Shobe of the University of Virginia, said low carbon prices will help the region cut emissions.

“If you had a choice between high prices and low prices, you’d want low prices because the cost of accomplishing the goal is lower,” he told Climate Central. “That means you’re getting what you want cheaper, and in the end you’ll want to buy more of it.”

The RGGI story gave no indication of whether the Supreme Court stay had had any impact on revenues to the California cap-and-trade system, which faced possible collapse last month after a quarterly auction raised only $2.5 million of the $150 million it was supposed to produce.