| NEW YORK, Sept 5
NEW YORK, Sept 5 Carbon futures prices in the
U.S. Northeast market have dropped nearly 20 percent since the
contracts debuted last month on expectations that power
companies will have little initial need to buy permits to emit
the greenhouse gas pollution.
"It just doesn't feel like there's excitement necessary to
spark a market at this point," one New York greenhouse
emissions broker said. "There's no major rush to jump in."
Prompt prices for Regional Greenhouse Gas Initiative carbon
futures on the Chicago Climate Futures Exchange settled at
about $4.48 a ton on Thursday, about 19 percent below prices
when they debuted on Aug. 19.
The RGGI, a group of 10 states in the U.S. Northeast, will
officially begin regulating the main greenhouse gas, carbon
dioxide, at power plants on Jan. 1.
Some of the states will offer permits to emit carbon to
power plants and investors in RGGI's first auction on Sept. 25,
when permits representing 12 million tons of emissions will go
Ahead of the auction, RGGI carbon futures contracts started
trading late last month on the CCFE, owned by Climate Exchange
PLC CLIE.L, and on the New York Mercantile Exchange NMW.N.
Carbon market players said power companies have three years
to comply with RGGI regulations, so many of them will wait out
the first auction at least to discover where the price lies.
"The utilities ... are interested in kind of sitting back
and seeing how the market evolves before they have to commit.
There's not much advantage for early actors in this market,"
said Donald Sunderland, vice president of Misys Open Source
Also cutting demand, emissions have recently fallen below
the cap RGGI agreed to. In fact, RGGI CO2 emissions in 2007
were about 9 percent below the cap the group set of 188 million
tons per year from 2009 to 2014, according to Environment
Northeast, a green group that helped form the market.
Emissions have fallen as it became economical for power
plants to burn natural gas rather than dirtier oil, cooler
summer weather and a softer economy. Still, the emissions could
rise again quickly, which could lead to increased demand for
New York, New Jersey, Delaware and New Hampshire, states
that represent 55 percent of the cap, failed to finalize
regulations in time and will not be offering their permits in
the September auction. The states may participate in the next
auction in December, or in other ones next year.
(Editing by Walter Bagley)