Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

A New World Order

Fortnightly Magazine - February 2005

and Vermont. Two additional states, Pennsylvania and Maryland, as well as the District of Columbia, the Eastern Canadian Provinces and New Brunswick, are official "observers" of RGGI, meaning they may elect to join at a later date. Collective CO 2 emissions from the RGGI states are substantial in the global context, according to 2001 data from the Oak Ridge National Laboratory. The states have combined emissions of 527 million metric tons of CO2 (MMTCO2)-9.3 percent of total U.S. CO 2 emissions and nearly the emissions level of the United Kingdom. Collectively, the states are the fifth highest CO 2 emitter in the world.

The RGGI program currently covers CO 2 emissions from some 758 fossil fuel-fired electricity generating units (EGUs) having a nameplate capacity of 25 MW or more within the nine member states. Under the model rule being developed, CO 2 emissions from EGUs will be capped at specified levels that have not yet been determined. The model rule-due in April 2005-will outline the conceptual framework for the cap-and-trade program. After the program is up and running in 2006, participants may choose to expand the program to other carbon-intensive sectors to achieve further reductions.

Not surprisingly, recent modeling of the impact of RGGI on electricity prices conducted by Connecticut predicts that average wholesale electricity prices will increase significantly over the forecast period. Similar electricity price increases in the EU are forecast as a result of the EU ETS. 1

EU Emissions Trading Takes Off

On Jan. 1, 2005, the EU commenced CO 2 emissions trading under the ETS. The program applies to some 12,000 installations, namely producers of energy, steel, cement, glass, ceramic, brick, pulp, and paper. The first phase of the EU ETS runs from Jan. 1, 2005, to Dec. 31, 2007. The second phase runs from 2008 to 2012. Under the ETS, each covered facility is required to hold a sufficient number of "allowances" (one allowance equals one metric ton of CO 2) representing its authorized level of CO 2 emissions, or its "cap." Each EU member is allocated allowances to its covered facilities pursuant to each country's National Action Plan. Before April 30 of each year, subject facilities are required to surrender a sufficient number of allowances covering their actual emissions for the year. To meet their emission caps, facilities can either reduce their CO 2 emissions down to their specified level, or purchase allowances from the emissions allowance market.

The EU allowance market will be supplied by excess allowances generated by facilities that have reduced their emissions below their caps. While allowances will be generated primarily by facilities within the EU, allowances may also be supplied by other non-EU CO 2 trading systems, pursuant to the EU's so-called Linking Directive. The Linking Directive allows EU ETS installations to purchase allowances from outside the EU to satisfy their emissions caps. 2 The Directive states that CO 2 emissions reduction undertaken outside the EU pursuant to the Kyoto Protocol's Joint Implementation (JI) and Clean Development Mechanism (CDM) programs may qualify for allowances that can be bought and sold