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OTC RGGI allowance prices rebound slightly after recent weakness

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OTC RGGI allowance prices rebound slightly after recent weakness

Followingrecent weakness, over-the-counter CO2 allowance prices under the RegionalGreenhouse Gas Initiative advanced to kick off the first week of October. As ofOct. 5, the RGGI spot allowance contract was assessed in a bid-and-offer rangeof $4.56/ton to $4.61/ton, up 5 cents from prior weekly assessments.

Accordingto broker data as of Oct. 5, the RGGI October 2016 vintage 2016 contract was markedin a bid-and-ask spread of $4.55/ton to $4.66/ton, gaining 5 cents week overweek. The benchmark December 2016 vintage 2016 futures contract was discussedin a bid-and-offer range of $4.58/ton to $4.68/ton, increasing 3 cents on theweekly period.

RGGICO2 allowance prices at the secondary market had been softer overall in theaftermath of the program's third quarterly auction for the year held Sept. 7. During the sale, 100%of the more than 14.9 million allocation year 2016 CO2 allowances werepurchased at a clearing price of $4.54/ton. Although demand for the allowanceswas robust, the clearing price was up just 1 cent from the program's priorauction price of $4.53/ton in June.

TheRGGI states — Connecticut, Delaware, Maine, Massachusetts, Maryland, NewHampshire, New York, Rhode Island and Vermont — use a market-basedcap-and-trade program to reduce greenhouse gas emissions from regional powerplants, selling nearly all emissions allowances through auctions and investingproceeds in energy efficiency and renewable energy projects.

TheRGGI states are undergoing a program review, with a focus on dovetailing theU.S. EPA's Clean Power Plan with the regional cap-and-trade system. The CleanPower Plan would require states to meet individual carbon emissions rate limitsat existing power plants beginning in 2022. Various U.S. states and severalpower industry groups filed suit in the D.C. Circuit to overturn the rule, buta coalition of 18 states and many environmental organizations filed petitionsto intervene in the case on the EPA's behalf. The U.S. Supreme Court stayed therule in February until all legal challenges are resolved.

Toachieve the rigorous emissions reductions that would be set forth by the CleanPower Plan, discussions within RGGI have centered on the use of a stricterprogram emissions cap of 5%. The 2016 RGGI cap is 86.5 million tons anddeclines 2.5% per year through 2020.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.