Atthe over-the-counter market, prices for Regional Greenhouse Gas Initiative CO2allowances continued to plungetoward $4.00/ton following a recent failed attempt to crack through $6.00/ton.

Brokerdata as of July 19 showed the RGGI spot allowance contract in a bid-and-offerrange of $4.17/ton to $4.48/ton, slumping 89 cents on the week. The spotcontract has dropped a total of $1.55, or 26.4%, since hitting a June 23 peakof $5.88/ton.

TheRGGI July 2016 vintage 2016 contract was marked in a bid-and-ask spread of$4.17/ton to $4.48/ton, dropping 90 cents from the week before. The contracthas dropped a total of $1.57, or 26.6%, since seeing a June 24 peak of $5.90/ton.

Asof July 19, the benchmark December 2016 vintage 2016 futures contract waspegged in a bid-and-offer range of $4.25/ton to $4.50/ton, plunging 93 centsweek over week. The contract has dropped a total of $1.55, or more than 26%,since reaching a June 24 high midpoint of $5.93/ton.

Thepush toward $6.00/ton in late June was driven in part by a stakeholder programreview meeting held June 17. At the time, officials said they are consideringtightening the Northeast carbon cap-and-trade program's emissions cap andoffered updated modeling completed by ICF International. The modelingexamines scenariosunder which the program cap is reduced by 2.5% and 5.0% per year and shows RGGICO2 allowance prices are likely to rise through 2031, the end of the projectionperiod.

Over-the-counterCO2 RGGI allowance prices first began to rise earlier in June after the resultsof the program's latest quarterly auction were released, even though theclearing price was the lowest in more than two years. At the , 100% of the more than 15.0million allocation year 2016 CO2 allowances on offer were purchased at aclearing price of $4.53/ton, which was down 72 cents, or 13.7%, from the Marchauction price.

TheRGGI participating states, which include Connecticut, Delaware, Maine,Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont, areundergoing a program review this year, with a focus on dovetailing the programwith eventual implementation of the Clean Power Plan.

Thecurrent RGGI cap extends until 2020, while the Clean Power Plan complianceperiod begins in 2022 and ends in 2030.

"RGGIcaps must extend at least until 2030 to continue the downward trajectory ofemissions to comply with CPP targets and provide market certainty,"according to a July 13 note from EnerKnol Research.

"RGGI'sdecision on whether to adjust the program to ensure participating states'compliance with the CPP will significantly impact the allowance prices, whichmust be sufficient to incentivize investments in low-carbon generation andsupport state emissions reduction goals. The clarifications regarding RGGI'spost-2020 cap will help reduce regulatory uncertainty and improve the stabilityin the RGGI market," EnerKnol said.

TheRGGI states releasedauction documents July 11 for the program's third quarterly auction of theyear, which will offer a total of 14,911,315 allocation year 2016 RGGI CO2allowances for sale with a reserve price of $2.10/ton.

Theupcoming auction, to be held Sept. 7, will feature a 10 million allowance costcontainment reserve, which will be accessed if the interim clearing priceexceeds the cost containment reserve trigger price of $8.00/ton.

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