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Secondary market RGGI CO2 allowance prices roll back toward $5/ton

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Secondary market RGGI CO2 allowance prices roll back toward $5/ton

RegionalGreenhouse Gas Initiative CO2 allowances at the secondary market slumped back toward$5.00/ton during the final week of April. Broker data as of April 27 showed theRGGI spot allowance contract eyed in a bid-and-offer range of $4.93/ton to $5.00/ton,down 14 cents week over week.

As ofApril 27, the RGGI May 2016 vintage 2016 futures contract was assessed in a bid-and-askspread of $4.86/ton to $5.05/ton. The benchmark December 2016 vintage 2016 futurescontract was marked in a bid-and-offer range of $4.95/ton to $5.10/ton as of April27, easing 15 cents week over week.

Spikingabove $8.00/ton just after the start of the year, secondary market RGGI CO2 allowanceprices cratered nearly50% in value in mid-February on news that the U.S. Supreme Court had the U.S. Environmental ProtectionAgency's Clean Power Plan, effectively putting the rule on hold. It had been anticipatedthat the nine RGGI participating states would use the regional cap-and-trade programas a mechanism for compliance with the Clean Power Plan. Although the market somewhat shortly thereafter,over-the-counter RGGI CO2 allowance prices have largely remained soft, heading backtoward $5.00/ton.

Lookingto the program's next quarterly auctionto be held by the RGGI participating states June 1, a total of 15,089,652 allocationyear 2016 CO2 allowances will be offered for sale. A reserve price of $2.10/tonwill be used again. All 10 million cost containment reserve allowanceswill be available during the June auction. The cost containment reserve is a fixedadditional supply of CO2 allowances that is only accessed if the interim clearingprice exceeds the cost containment reserve trigger price. For the current year,the trigger price level is $8.00/ton.

In RGGI'sprior auction held in March,100% of the more than 14.8 million allocation year 2016 CO2 allowances on offerwere purchased at a clearing price of $5.25/ton. The auction price dropped $2.25,or 30%, from the prior quarterly sale price in December 2015, which set a recordhigh at $7.50/ton.

RGGIis comprised of nine states: Connecticut, Delaware, Maine, Massachusetts, Maryland,New Hampshire, New York, Rhode Island and Vermont. The participating states usea market-based cap-and-trade program to reduce greenhouse gas emissions from regionalpower plants, selling nearly all emissions allowances through auctions and investingproceeds in energy efficiency projects in the residential, commercial and municipalsectors.

The RGGIparticipating states are undergoing a program review this year, during which time changes to the Northeastcap-and-trade program's rules will be considered. The RGGI will hold a series ofmeetings to gather comments and suggestions from stakeholders on various issues,with the next meeting scheduled for April 29 in Boston.

Aheadof the April 29 meeting, officials requested stakeholder comments on the minimumcompatibility requirements under which the current RGGI states could decide to tradeallowances with states that are not participants of the RGGI program.

"TheRGGI states still anticipate complying with the Clean Power Plan (CPP) using a mass-basedemissions standards approach. When considering whether to trade with non-RGGI states,what program design features and other conditions, at a minimum, should be alignedwith RGGI program elements in order for RGGI states to be able to trade with thoseother states," RGGI said in a notice.

Topicsfor stakeholder exploration include the fungibility of allowances; treatment ofnewly constructed emission sources; overall stringency; allowance tracking systems;market monitoring and reporting; distribution of allowances; auctioning; use ofproceeds from sale of allowances; administrative costs; additional linkages withother states or regions; and implications for RGGI states' use of emissions standardapproach for Clean Power Plan implementation.

Stakeholdercomments are due back to RGGI by 5 p.m. ET on May 9.

Market prices and included industrydata are current as of the time of publication and are subject to change. For moredetailed market data, including power,naturalgas, and coalindex prices, as well as forwardsand futures,visit our Commodities Pages.