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Prices for Northeast carbon dioxide allowances step lower

Following recent mixed price action, Regional Greenhouse Gas Initiative carbon dioxide allowance values at the secondary market eased during the week ended Oct. 17.

According to broker data as of Oct. 17, the October 2017 vintage 2017 RGGI contract was marked in a bid-and-ask range of $4.12/ton to $4.22/ton, declining 15 cents on the week.

The benchmark December 2017 vintage 2017 contract was quoted in a bid-and-offer spread of $4.15/ton to $4.34/ton, down 12 cents on the weekly period.

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SNL Image

Over-the-counter prices for RGGI CO2 allowances rallied above $4.50/ton at the end of August, after the nine RGGI states announced proposed program changes, including a cut to the emissions ceiling by an additional 30% by 2030 relative to 2020 levels.

Under the proposal, the RGGI cap would decline by 2,275,000 tons of CO2 per year, from 2021 through 2030, yielding a total reduction of 22,750,000 tons of CO2, or 30% of the 2020 cap. The RGGI states are also proposing additional adjustments to the RGGI cap, to be implemented from 2021 to 2025, to account for the full bank of excess allowances at the end of 2020.

Other suggested RGGI program changes include the implementation of an emissions containment reserve. The reserve would allow states to withhold up to 10% of their annual emissions allowances in reserve, restricting the sale of those allowances when prices fall below certain levels — $6.00/ton in 2021, with the price to rise by 7% per year thereafter.

The RGGI states expect to release a final model rule with additional analyses by the end of this year. Then the participating states will begin their individual processes to adopt the new model rule. It is hoped that all state statutory and regulatory amendments related to the updated rule will be completed as early as January 2019, with program changes to be in place and effective by January 2021.

The RGGI states are comprised of 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 in the residential, commercial and municipal sectors.

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.