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RGGI secondary market CO2 allowance prices climb as January draws to close

Over-the-counter Regional Greenhouse Gas Initiative CO2 allowance prices marched higher during the week that ended Jan. 31, as the month drew to a close.

According to broker data, the RGGI spot allowance contract was eyed in a bid-and-ask spread of $3.78/ton to $3.93/ton, increasing 10 cents from the week prior. As of Jan. 31, the February 2017 vintage 2017 contract was assessed in a bid-and-offer range of $3.79/ton to $3.95/ton.

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The December 2017 vintage 2017 futures contract was marked in a bid-and-ask spread of $3.90/ton to $4.05/ton, also gaining 10 cents week over week.

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Secondary market RGGI CO2 allowance prices have gained upside traction in recent weeks, initially garnering support from the news that Entergy Corp.'s Indian Point nuclear power plant in New York will be shuttered ahead of schedule. The first of Indian Point's two reactors, unit 2, will be closed by April 30, 2020, followed by unit 3 by April 30, 2021. The two units produce a total of 2,078 MW.

Analysts have indicated that, assuming the lost generation from Indian Point is replaced with mostly natural gas, New York state's carbon emissions could increase anywhere from 10% to 15% per annum.

RGGI is made up of nine states: Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. The participating 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.

The RGGI states are conducting an extended program review that began in 2016, with a focus on the potential tightening of the RGGI's emissions cap, as well as coordination with the implementation of the Clean Power Plan. The participating states have rescheduled a Jan. 31 stakeholder webinar for Feb. 8, at which time updated modeling analyses will be presented and discussed.

The RGGI states will hold their first quarterly CO2 allowance auction March 8. The 35th RGGI auction will offer for sale 14,371,300 allocation year 2017 CO2 allowances. The RGGI states will use a reserve price of $2.15/ton this year, up from $2.10/ton in 2016.

There will be a 10 million-allowance cost containment reserve available for the upcoming auction. The reserve will be accessed if the interim clearing price exceeds the cost containment reserve trigger price of $10.00/ton, up from $8.00/ton in 2016.

In RGGI's prior quarterly CO2 allowance auction held in early December 2016, 100% of the more than 14.7 million allocation year 2016 allowances on offer sold at a clearing price of $3.55/ton. The auction 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 2016.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.