SOURCE: Point Carbon

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April 15, 2010 16:00 ET

Senate Bill Likely to Result in Carbon Price of $31 per Ton 2013-2020

Point Carbon Models US Carbon Market From Upcoming Senate Bill

WASHINGTON, DC--(Marketwire - April 15, 2010) -  Point Carbon's North American Research division has forecasted a price of $31 per ton of carbon dioxide equivalent (CO2e) in a United States Emissions Trading System (US ETS) from expected parameters of the forthcoming Kerry-Graham-Lieberman (KGL). This would result in an increase of 27 cents per gallon of gasoline at the pump for the average US consumer. 

The updated modelling reflects presumed carbon market architecture from involved stakeholders and discussions with sources close to the bill. Point Carbon is the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.

A key assumption made in this modelling is that the US honor and codify its previously stated commitment to reduce greenhouse gases 17 percent below 2005 levels, as previously passed in the Waxman-Markey bill and pledged to the United Nations Framework Convention on Climate Change. Also factored into the model is an anticipated expansion of renewable power and nuclear power needed to comply with proposals for a federal Renewable Energy Standard (RES) with a shift toward covering only the US electric power sector in the early years of the program.

"A clear message that we can see from these new numbers is that the longer the US waits to enact policy to reach its 2020 pledge, the more expensive it will be to reach that target," said Emilie Mazzacurati, Manager for Point Carbon's North American Research Division. "If the commitment remains, time begins to drive the price more than the scope of the cap."

The revised model assumes transportation is covered under the cap and pays a "linked fee" pegged to carbon prices. If the market were to include only the power sector under the cap, Point Carbon finds prices would fall to $15 per ton of CO2e on average, as the cost of reductions is lowest in the power sector. The team also finds that the power sector alone could reduce emissions enough for the US to meet its 2020 pledge at a cost of $18 on average over 2013-2020.

With a Kerry-Graham-Lieberman structure for a US ETS, the value of the US carbon market would be $255 billion, while a cap-and-trade program only for the US power sector would be worth $72 billion. In 2009, the European Union's Emission Trading Scheme (EU ETS) was valued at €73 billion ($99 billion). 

About Point Carbon
Point Carbon is a world-leading provider of independent news, market analysis and advisory services for global power, gas and carbon markets. Point Carbon's comprehensive services provide professionals with market-moving information through monitoring fundamental information, key market players, and business and policy developments.

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