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Northeast RGGI allowances slide in secondary market amid tepid interest

Over-the-counter prices for Regional Greenhouse Gas Initiative CO2 allowances generally slipped during the week ended Aug. 5 amid overall thinner trading interest.

As of Aug. 5, the August 2019 vintage 2019 RGGI contract was assessed in a bid-and-ask spread of $5.24/ton to $5.34/ton, down 27 cents from July 26 assessments. Also as of Aug. 5, the benchmark December 2019 vintage 2019 contract was marked in a bid-and-offer range of $5.32/ton to $5.39/ton, losing 30 cents from July 26.

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The July 2019 vintage 2019 RGGI contract ended its run in a $5.50/ton to $5.61/ton range as of July 26, rising 10 cents from July 1.

RGGI secondary markets had ramped higher in value at the end of July, as compliance entities scooped up allowances amid a heat wave in the Northeast when power burn soared. Others said over-the-counter prices for RGGI allowances had shifted higher due to increased buying activity before the program's next quarterly allowance auction.

The nine RGGI participating states will hold the program's 45th auction on Sept. 4, offering more than 13 million CO2 allowances for sale. In the auction, a minimum reserve price of $2.26/ton will be used. Additionally, a cost-containment reserve of 10 million CO2 allowances will be available during the September auction that will be accessed only if the interim clearing price exceeds the trigger price of $10.51/ton.

The RGGI program is made up of Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. The states use a market-based cap-and-trade program to reduce greenhouse gas emissions from regional power plants, selling nearly all emissions allowances through auctions and investing the proceeds in energy efficiency projects.

In the RGGI's prior auction in June, 100% of the more than 13 million allowances sold at a clearing price of $5.62/ton, up 35 cents from March and the highest level since RGGI's December 2015 auction.

According to RGGI, 47% of the allowances sold in the June auction were purchased by compliance entities or their affiliates, while compliance-oriented entities scooped up 38% of the allowances on offer. There were 47 bidders in the June auction, with the ratio of bids coming in at 2.8 times the total amount of allowances on offer.

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