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Latest RGGI auction price drops more than 22% to $3.55/ton


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Essential IR Insights Newsletter - February 2023

Latest RGGI auction price drops more than 22% to $3.55/ton

In the Regional Greenhouse Gas Initiative's fourth and final quarterly CO2 allowance auction of the year held Dec. 7, 100% of the more than 14.7 million allocation year 2016 allowances on offer sold at a clearing price of $3.55/ton. Results of the December RGGI auction were released Dec. 9 and showed the clearing price was down a sharp 99 cents, or almost 22%, from the program's prior auction, which came in at $4.54/ton in September.

In the most recent auction, bids for the RGGI CO2 allowances ranged from a low at the reserve price of $2.10/ton to a high of $13.75/ton. There were 33 total bidders in the December RGGI sale, with the ratio of bids coming in at 2.4 times the total amount of allowances on offer. RGGI said 71% of the CO2 allowances sold in the December auction were bought by compliance entities or their affiliates. Compliance-oriented entities purchased 40% of the RGGI CO2 allowances on offer in the latest sale.

Once again, the auction 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: $8 in 2016, $10 in 2017 and rising by 2.5% each year thereafter to account for inflation.

The latest RGGI auction netted a total of about $52.5 million. Cumulative proceeds from all of the RGGI's 34 allowance auctions exceed $2.6 billion.

The states in the RGGI are 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 proceeds in energy efficiency projects in the residential, commercial and municipal sectors.

At the over-the-counter market Dec. 8, broker data showed the spot RGGI contract was pegged in a bid-and-ask range of $3.50/ton to $4.00/ton. The December 2016 vintage 2016 RGGI contract was marked in a bid-and-offer spread of $3.60/ton to $4.00/ton.