AI Boom to Add Hidden Extra Cost to Northeast US Power Bills
(Bloomberg) -- Data centers are driving a surge in carbon prices in the US Northeast, helping push CO2 costs in the region past California and raising the prospect of higher energy costs for consumers.
The price to emit a so-called short ton of CO2 into the atmosphere under the Regional Greenhouse Gas Initiative — a market covering 10 states, including New York — jumped 31% last week to $47.56. Traders are betting that Virginia’s planned return to the market in July will boost demand for permits because the state is a major hub for data centers.
The rally has sent prices past California’s record CO2 price of $44 set in 2024. The US doesn’t have a federal-level carbon price and instead has two state-run markets in California and Washington, the latter of which has a price around $66. That’s in addition to the RGGI, which has existed since 2009 and is the country’s oldest program.
Carbon markets put a price on each ton of CO2 emitted into the atmosphere, typically by industry. The goal is to steadily reduce emissions while incentivizing the adoption of renewable energy and other clean technologies.
Liquidity in the US markets is relatively thin, especially compared with the European Union’s Emissions Trading System, which is the world’s largest market. RGGI covers only CO2 emissions from the power sector, which are expected to increase with the growing artificial intelligence-led demand for data centers. RGGI also risks adding to consumer bills, which are already rising because of the boom.
Still, analysts at BloombergNEF say the rally is overdone, especially with the Champlain Hudson Power Express transmission line expected to start this month, bringing clean electricity from Quebec’s abundant hydropower to New York and helping curb emissions in the US Northeast.
“The rally may have run ahead of itself,” said Bo Qin, an analyst at BloombergNEF, which forecasts a 2026 price of $26 per short ton under “a slow-decarbonization scenario.”
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