The RGGI held its second auction for carbon allowances on Wednesday. As noted on the RGGI website:

States will sell emission allowances through auctions and invest proceeds in consumer benefits: energy efficiency, renewable energy, and other clean energy technologies. RGGI will spur innovation in the clean energy economy and create green jobs in each state.

The clearing price for Auction 2 was $3.38 per allowance.

This is slightly up from the $3.07 per ton price in the September auction. To put this in perspective, a price of $3 per ton applied to coal power would amount to about one-third of a penny per kilowatt-hour. Applied to vehicle emissions, it would amount to about three pennies per gallon.

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So is $3 per ton good or bad? Should RGGI impose a meaningful price floor to more effectively “spur innovation in the clean energy economy,” or is it better to just let the market find its own low-price equilibrium?

One perspective, articulated by EDF’s media director, is that “the goal of climate policy is not to set a price, it’s to cut pollution … If we’re reducing emissions on schedule, if we’re achieving the environmental goal with the cap, why would we not want to do it at the lowest-possible cost?”

I have some very different perspectives on this topic, which I won’t repeat here, but I’d be interested in other readers’ views.

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