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Carbon Market

No anti-competitive conduct in CO2 allowances – report

An independent power market monitor's 2011 report ruled out doubts that the Regional Greenhouse Gas Initiative's carbon dioxide allowances are becoming prone to anti-competitive conduct.

Potomac Economics, an analyst and legal adviser for the electricity industry, said it found no material concerns regarding the auction process; barriers to participation in the auctions; competitiveness of the auction results; or competitiveness of the secondary market for the allowances.

"We find no evidence of anti-competitive conduct in the secondary market for CO2 allowances, and we find that firms have generally purchased quantities of allowances that are consistent with their expected needs," the market monitor said as it released its 2011 Annual Report on the Market for RGGI CO2 Allowances.

The R.G.G.I., which started in 2009, is the first mandatory cap-and-trade program to limit CO2 emissions in the United States. Electric power generators located in U.S. states participating in the initiative are required to obtain a number of CO2 allowances equal to the number of tons of CO2 they can emit.

From 2012 to 2014, the R.G.G.I. cap is 165 million short tons of CO2 per year. Beginning in 2015, the cap will decrease by 2.5 percent per year, for a total reduction of 10 percent by 2018.

The R.G.G.I. distributes CO2 emissions allowances to the market primarily through auctions, which it says is a unique trait compared with existing cap-and-trade programs.

The volume weighted average auction price for the first control period fell 2 percent from $1.93 in 2010 to $1.89 in 2011. Meanwhile prices of CO2 allowance futures for the first control period remained stable throughout 2011, with monthly average prices ranging from a low of $1.87 in August to a high of $1.94 in March.

The Potomac Economics report evaluates activity in the market for 2011allowances, focusing on allowance prices; trading and acquisition of allowances in the auctions and secondary market; participation in the market by individual firms; and market monitoring.

Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont, who participate in the market, together have capped and will reduce power sector CO2 emissions 10 percent by 2018. – EcoSeed Staff

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