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Secondary market prices for RGGI CO2 allowances turn higher

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Secondary market prices for RGGI CO2 allowances turn higher

Inthe wake of recent bearishness, Regional Greenhouse Gas Initiative CO2allowance prices in the secondary market have turned higher. Over-the-counterbroker data as of April 5 showed the RGGI spot allowance contract assessed in abid-and-ask spread of $5.45/ton to $5.60/ton, rising 36 cents on the weeklyperiod.

TheRGGI April 2016 vintage 2016 futures contract was marked in a bid-and-offerrange of $5.45/ton to $5.60/ton as of April 5, also gaining 36 cents from theweek prior. The benchmark December 2016 vintage 2016 futures contract was eyedin a bid-and-ask spread of $5.55/ton to $5.70/ton, advancing about 38 centsfrom a week earlier.

Secondarymarket prices for RGGI CO2 allowances had been pointed lower following theprogram's firstquarterly auction of the year. During the sale, 100% of the more than 14.8million allocation year 2016 CO2 allowances on offer were purchased at aclearing price of $5.25/ton. The March auction price dropped $2.25, or 30%,from the program's prior quarterly sale price in December 2015, which was arecord high at $7.50/ton.

Inthe next quarterly auction to be held by the RGGI states June 1, a total of15,089,652 allocation year 2016 CO2 allowances will be offered for sale. Areserve price of $2.10/ton will be used in the June auction. Additionally, all10 million cost containment reserve allowances will be available. The costcontainment reserve is a fixed additional supply of CO2 allowances that is onlyaccessed if the interim clearing price exceeds the cost containment reservetrigger price. For the current year, that price level is $8.00/ton.

RGGIis comprised of nine states: Connecticut, Delaware, Maine, Massachusetts,Maryland, New Hampshire, New York, Rhode Island and Vermont. The participatingstates use a market-based cap-and-trade program to reduce greenhouse gasemissions from regional power plants, selling nearly all emissions allowancesthrough auctions and investing proceeds in energy efficiency projects in theresidential, commercial and municipal sectors.

Rallyingabove $8.00/ton in January, secondary market RGGI CO2 allowance prices crumbledalmost 50% in value in mid-February to between $4.00/ton and $5.00/tonfollowing a wave of selling and liquidation triggered by the news that the U.S.Supreme Court unexpectedly granted a stay of the U.S. Environmental ProtectionAgency's Clean Power Plan, effectively putting the rule on hold. It had beenanticipated that the nine RGGI participating states would use the regionalcap-and-trade program as a mechanism for compliance with the Clean Power Plan.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including power,naturalgas, and coalindex prices, as well as forwardsand futures,visit our Commodities Pages.