RGGI carbon dioxide allowance prices jump to five-year high

Houston — The price of the Regional Greenhouse Gas Initiative's carbon dioxide allowances increased to $6.82/st in the third auction of 2020, the cap-and-trade program's administrator announced Sept. 4.

The 49th RGGI auction price climbed 20.7% from Auction 48, which had a clearing price of $5.75/st, and was 31% higher than the third auction of 2019. The Auction 49 clearing price is the highest since Auction 30 in December 2015, according to RGGI data.

The auction, which took place Sept. 2, saw all 16,192,785 CO2 allowances sold, with bids ranging from $2.32/st to $10/st per allowance, according to a report from Potomac Economics, the auction's independent market monitor. The average bid was $6.67st and the median bid was $6.72/st.

Fifty-five bidders were involved in the 49th auction with awards distributed to across 34 bidders, with six bidders purchasing one million tons or more and 19 bidders purchasing 200,000 tons or more.

Compliance entities purchased 74% of allowances in auction 49, the same as the average for auctions 1-49. Compliance-orientated entities purchased 55% of the allowances in the offering.

After settlement of auction 49, 51% of allowances in circulation will be held by compliance-oriented entities, with 58% are believed to be held for compliance purposes.

The auction generated $110.4 million for reinvestment in strategic programs, including energy efficiency, renewable energy, direct bill assistance and GHG-abatement programs.

The 48th auction also included 11.8 million cost containment reserve allowances available for sale, but none were sold. The CCR is a fixed additional supply of allowances that are made available for sale if CO2 allowance prices exceed certain price levels, which is $10.77 in 2020.

RGGI additions in the works

It was announced in July that Virginia will join RGGI Jan. 1, 2021 after the state finalized its CO2 Budget Trading Program to establish a market-based program to reduce greenhouse gas emission. The addition of Virginia will increase the regional emissions cap coverage by nearly 30%.

Governor Ralph Northan signed the Virginia Clean Economy Act on April 12. The Virginia General Assembly passed legislation in February that laid the groundwork for the state to join the RGGI. The bill required utilities to decarbonize the state's fossil-fuel dominated power portfolio with a heavy reliance on renewables. It also paved the way for the state to join RGGI, after last year's attempt to implement RGGI via regulations was blocked by the General Assembly.

Pennsylvania could also join RGGI.

Pennsylvania Governor Tom Wolf issued an executive order June 22 directing the Department of Environmental Protection to develop by Sept. 15 a proposed rulemaking to abate, control or limit CO2 emission from fossil fuel-fired power plants. The proposed rulemaking should establish a CO2 budget consistent in stringency to the one established by RGGI states and be sufficiently consistent with the RGGI Model Rule to allow allowances to be traded with holder of allowances from other states, according to the executive order.

RGGI background

RGGI is a cooperative effort of New England and Mid-Atlantic states to reduce emissions of carbon dioxide from the power sector. It became the first mandatory cap-and-trade program to limit carbon emissions in the US in 2009.

Under RGGI, power plant owners in 10 states -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont -- with generating capacity at or above 25 MW are required to obtain a number of allowances equal to the number of tons of carbon dioxide they emit.

New Jersey rejoined RGGI Jan. 1, 2020 after an eight-year hiatus.