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RGGI's 1st carbon allowance auction of year sells out at $5.27/ton

In the Regional Greenhouse Gas Initiative's first quarterly auction of the year, 100% of the more than 12.8 million carbon dioxide allowances on offer sold at a clearing price of $5.27/ton, according to results released March 15. This was 8 cents lower than the price in the prior RGGI sale held in December 2018.

Bids in the March auction ranged from a low at the market reserve price of $2.26/ton to a high of $7.12/ton, generating $67.9 million for the nine participating states. There were 43 bidders in the RGGI auction, with the ratio of bids coming in at 3.0 times the total amount of allowances.

RGGI said 74% of the allowances sold in the auction were bought by compliance entities or their affiliates. Compliance-oriented entities purchased 51% of the auction allowances.

The auction clearing price was not high enough to trigger the sale of allowances from the cost containment reserve. The cost containment reserve is a fixed additional supply of allowances that are only available for sale if prices exceed certain levels. This year's level is $10.51/ton and increases 2.5% through 2020 to account for inflation.

The RGGI states are Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. They 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 proceeds in energy efficiency projects.

"As we conclude this successful auction, the RGGI states look forward to a year of continued bipartisan environmental progress in 2019," said Ben Grumbles, secretary of the Maryland Department of the Environment and chair of the RGGI Inc. board of directors. "New prospective RGGI states are moving ahead with steps to create state-specific regulations and participate in our program, and we applaud their ongoing efforts."

In Virginia, Gov. Ralph Northam vetoed legislation March 14 that would restrict the state's ability to join a regional cap-and-trade program such as RGGI. House Bill 2611 would have prohibited the governor and state agencies from crafting regulations to create a cap-and-trade system and would have prevented it from joining such a program without the support of two-thirds of the Virginia General Assembly.

Northam vetoed similar legislation in 2018 at a time when his administration is working to launch a market-based system to cut carbon emissions from fossil-fuel power plants by 30% from 2020 to 2030.

Meanwhile, in December 2018, state legislators proposed two rules that would allow New Jersey to rejoin the RGGI. One of the rules establishes the mechanisms for rejoining and sets the initial carbon dioxide cap for the state's electricity generation sector at 18 million tons starting Jan. 1, 2020, when the state will officially begin participating again. The other proposed rule establishes the framework for how New Jersey would spend proceeds from RGGI allowance auctions.