Over-the-counter prices for allowances under the Regional Greenhouse Gas Initiative dropped in value ahead of the next allowance auction to be held by the nine participating states.
As of Nov. 29, the benchmark December 2017 vintage 2017 contract was eyed in a bid-and-offer spread of $4.12/ton to $4.25/ton, down 6 cents on the week. The December 2018 vintage 2018 contract was assessed in a bid-and-ask range of $4.24/ton to $4.35/ton, easing 5 cents from the week prior.


The RGGI states will hold their last quarterly allowance auction of the year Dec. 6, offering more than 14.6 million CO2 allowances. The offering will be comprised of allocation year 2017 CO2 allowances as well as 88,808 allocation year 2015 and 227,595 allocation year 2016 allowances from state set-aside accounts.
A reserve price of $2.15/ton will be used and there will be a 10-million allowance cost-containment reserve available. The cost-containment reserve will only be accessed if the interim clearing price exceeds the cost-containment reserve trigger price of $10.00/ton.
At RGGI's September auction, 100% of the 14,371,585 allowances on offer were purchased at a clearing price of $4.35/ton. Results of the Sept. 6 sale showed that the price soared $1.82, or almost 72%, from the program's previous auction price of $2.53/ton, which was the lowest since December 2012.
Over-the-counter prices for RGGI CO2 allowances spiked to around $4.50/ton at the end of August when 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 is composed of nine states: Connecticut, Delaware, Maine, Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont.
In the third quarter, RGGI allowances futures prices posted an average of $4.12/ton, surging about 49% on the quarter but down 12% from the same quarter in 2016, according to a quarterly report released by independent market monitor Potomac Economics.
While RGGI CO2 allowance prices rose in the third quarter, secondary market trading activity also increased. Volumes for RGGI futures contracts listed on the Intercontinental Exchange Inc. totaled 46.7 million in the third quarter, up more than 50% on the quarter and about 75% higher on the year.
At the end of the third quarter of the year, there were 241 million CO2 allowances in circulation. Compliance-oriented entities held approximately 132 million, or 55%, of the allowances in circulation. Roughly 135 million, or 56%, of the allowances in circulation are believed to be held for compliance purposes, the report said.
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