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RGGI carbon allowance auction price drops 55 cents to clear at $3.80/ton

In the Regional Greenhouse Gas Initiative's final quarterly auction of the year, 100% of the almost 14.7 million carbon dioxide allowances on offer were purchased at a clearing price of $3.80/ton. Results of the Dec. 6 sale were released Dec. 8 and showed the clearing price was down 55 cents, or about 12.6%, from the program's prior auction price of $4.35/ton.

Auction bids for the RGGI allowances ranged from a low at the reserve price of $2.15/ton to a high of $8.00/ton. There were 35 bidders in the December RGGI auction, with the ratio of bids coming in at 2.2 times the total amount of allowances.

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RGGI said 64% of the allowances sold in the December auction were bought by compliance entities or their affiliates. Compliance-oriented entities purchased 55% of the allowances in the latest auction.

Once again, the auction RGGI clearing price was not high enough to trigger the sale of allowances from the cost containment reserve, or CCR. The CCR is a fixed additional supply of allowances that are only available for sale if CO2 allowance prices exceed certain price levels: $10 this year and rising by 2.5% each year thereafter to account for inflation.

The latest RGGI auction netted roughly $55.8 million. Cumulative proceeds from all of the RGGI's 38 allowance auctions to date total more than $2.8 billion.

As of Dec. 7 at the over-the-counter market, the benchmark December 2017 vintage 2017 futures contract was quoted in a bid-and-ask range of $3.82/ton to $4.20/ton.

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

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